MONTHLY BOND MARKET & RATING SNAPSHOT - MAY 2021 - FULL REPORT |
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| Report ID | 6053681 | Popularity | 1488 views 26 downloads | |||||
| Report Date | Jun 2021 | Product | ||||||
| Company / Issuer | Fixed Income Bond Market Update | Sector | Bond Market Update - Bond Market Update | |||||
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Global Markets In May, UST yields drifted lower despite the unexpected 4.2% y-o-y rise in April CPI. Rally in the UST market was supported by the Fed’s insistence that the current spike in inflation is transitory and several officials talking down future tapering plans. In contrast, sovereign yields in the euro zone were generally higher in May as economies and coronavirus immunisation programmes within the region gained traction. Similar to the US, yields on UK gilts ended the month lower. Investors mostly brushed off positive economic data prints in May, the more hawkish tone of the BoE and further relaxation of lockdown measures. Investors continue to add UK gilts to their portfolios in May amid emergence of the “Delta” variant of the COVID-19 virus in the UK. Meanwhile in China, CGB yields faced further downward pressure as inflation fears eased as China’s government issued a “zero tolerance” warning to commodity speculators in May. Foreign inflows have also supported CGBs. Malaysian Government Bond Market Gross issuance of MGS/GII in May was slightly lower at RM13.0 billion (Apr: RM13.5 billion), with new supply of MGS worth RM4.5 billion and GII worth RM8.5 billion being issued. Despite the surge in yields, demand for MGS/GII at public auctions was robust in May amid strong risk-off sentiment from local institutional investors. The average one-year BTC ratio for all three public auctions conducted stood at 2.3x (Apr: 2.1x). In the secondary market, MGS yields across the board have declined during the first week. However, yields along the belly until the long end of the curve started trading higher in the following weeks. This was due to stronger-than-expected 1Q2021 GDP growth, thin trading, and heightened inflation pressure. Yields were also pressured by expectations for further fiscal stimulus amid the announcement of a full nationwide lockdown as daily COVID-19 cases peaked at unprecedented levels. Yield on the 10y MGS surged 9bps to 3.24% (Apr: 3.15%). Malaysian Corporate Bond Market Gross issuance of long-term corporate bonds dipped for the third consecutive month in May to RM7.6 billion (Apr: RM12.7 billion) amid significant decline in new supply from rated corporate bond issuers (Excl. Cagamas). Issuances from rated corporate bond issuers fell to RM1.6 billion (Apr: RM10.7 billion) amid increasing calls for stricter lockdown measures. Credit spreads for the generic AAA and AA-rated spectrum were broadly tighter especially for the 5- and 7-year tenures in May. This was mainly due to a higher surge in MGS yields. However, credit spreads for the generic A-rated corporate bonds have widened amid elevated risk-off sentiment in domestic markets. Investors continued to be defensive throughout the month as generic AAA yields were broadly lower by 1bp to 5bps along the 3y10y curve. Meanwhile, yields on lower rating bands were broadly higher, especially the A-rating band. MARC Rating Activities In May, nine issue ratings were affirmed with their outlook remaining unchanged, and final ratings of four issues were added to MARC’s rating universe. In the same month, MARC also assigned a preliminary rating of AAIS to S P Setia Bhd’s proposed RM3.0 billion IMTN programme. Meanwhile, Serba Dinamik Holdings Bhd’s ratings were placed on MARCWatch Negative on May 31 after the initial ratings were assigned on May 11. This was due to issues raised by KPMG pertaining to the group’s annual accounts for FY2020. MARC also saw an increase in rating migration activities. MARC has lowered its ratings on Alpha Circle Sdn Bhd and upgraded Kimanis Power Sdn Bhd’s rating. Foreign Holdings of Local Bonds The local bond market recorded positive net foreign inflows for the 12th straight month in May but at a smaller momentum. It was the lowest monthly pace since September last year. Total foreign holdings rose by RM1.9 billion (Apr: +RM6.4 billion) to RM247.9 billion, equivalent to 14.7% (Apr: 14.8%) of total outstanding local bonds. Foreign demand for local bonds moderated in May amid fears of a taper tantrum in the US, heightened inflation expectations and the announcement of a full lockdown in Malaysia. |
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