CREDIT ANALYSIS REPORT

MONTHLY BOND MARKET & RATING SNAPSHOT - NOVEMBER 2021 - FULL REPORT

Report ID 60538900435 Popularity 582 views 11 downloads 
Report Date Dec 2021 Product  
Company / Issuer Fixed Income BM Update Sector Bond Market Update - Bond Market Update
Price (RM)
Normal: RM300.00        
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Rationale
Global Markets     

In November, The Fed hinted that it is speeding up the pace of its tapering of bond purchases. Investors expected that rate hikes would subsequently follow the conclusion of tapering activity. The long-end UST yield curve dropped significantly between 12bps to 15bps reflecting the hawkish tone of the Fed. In the EU, the return of demand for safe-haven assets following the emergence of Omicron variant dragged down sovereign bond yields across the euro area where 2y10y Bund yields declined between 15bps to 26bps. In the UK, the BoE tilts towards dovish stance as they might defer increasing interest rates given the economic uncertainties derived from the new variant. The UK gilt yield fell across all maturities in the range of 18bps to 28bps. In China, the economy is facing slower growth amid property sector woes, declining exports and strict COVID-19 controls. In November, yields on CGBs dropped significantly between 10 bps and 15 bps across the yield curve. 

Malaysian Government Bond Market     

MGS’ overall yield performance was firmer in November as safe-haven demand returned due to the development of Omicron variant. Gross issuance of MGS/GII slipped to RM15.9 billion in November (Oct: RM17.0 billion). As of the first 11 months of 2021, total MGS/GII issued amounted to RM155.9 billion, RM14.1 billion away from our projection of RM170.0 billion to RM180.0 billion for 2021. Demand for MGS/GII papers issued in November weakened. The auction for the RM2.0 billion 15y reopening of MGS saw strong bidding interest, with its BTC ratio exceeding 3.0x for the first time since July 2021. However, the RM4.5 billion 3y reopening of GII and the RM2.0 billion 20y reopening of MGS demand weakened as the BTC ratios came in well below the YTD average of 2.2x. 

Malaysian Corporate Bond Market     

In November, gross issuance of long-term corporate bonds surged to RM11.6 billion (Oct: RM8.1 billion). The growth was contributed by rated corporate, quasi-government and Cagamas bonds. Meanwhile, unrated corporate bonds dropped by RM 0.4 billion. Gross issuance of quasi-government bonds spiked the most by RM1.5 billion m-o-m to RM3.4 billion (Sep: RM1.9 billion). Corporate bond yields plunged in November due to bargain hunting activities. Parallel with the MGS market, yield curves have flattened across the AAA, AA and A-rated spectrum. Yields from the belly to the long end of the curve squeezed lower by 3bps to 15bps. 

MARC Rating Activities     

In November, MARC assigned final ratings of five issues to MARC’s rating universe. MARC assigned two preliminary ratings of MARC-1IS / AA-IS to UEM Sunrise Berhad (ICP/IMTN-3) programme with a combined nominal value of RM4.0 billion and A+IS to YNH Property Berhad’s proposed IMTN programme of up to RM700 million. MARC affirmed a total of nine issue ratings with their outlook remaining largely unchanged at stable. MARC removed the ratings of Serba Dinamik Holding Berhad’s RM500.0 million multi-currency ICP Programme and RM1.5 billion IMTN Programme with a combined limit of RM1.5 billion from MARCWatch Negative. MARC also downgraded its rating of the ICP/IMTN programmes to MARC-4IS / BBIS from MARC-1IS / A+IS.

Foreign Holdings of Local Bonds     

In November, the local bond market suffered from sell-offs as net foreign outflows dropped to RM3.5 billion (Oct: +RM2.9 billion) after recording net foreign inflows for three consecutive months. The share of foreign holdings diluted in November to 14.4% of total outstanding as foreign holding magnitude declined to RM250.4 billion (Oct: RM254.0 billion). Foreign outflows were dragged by the enormous outflow of MGS by RM4.8 billion in November (Oct: +RM2.7 billion). The high redemption value was the major contributor to the net foreign outflows. As a result of the net foreign outflow, ringgit depreciated to RM4.2265 against the USD (October: RM4.1440).

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