CREDIT ANALYSIS REPORT

MONTHLY BOND MARKET & RATING SNAPSHOT - APRIL 2022 - FULL REPORT

Report ID 605389004717 Popularity 1171 views 32 downloads 
Report Date May 2022 Product  
Company / Issuer Fixed Income Bond Market Update Sector Bond Market Update - Bond Market Update
Price (RM)
Normal: RM300.00        
  Add to Cart
Rationale
Global Markets          

10y UST yield pushed closer to 3% in April – a level not seen since late 2018. Hot inflation, uncertainties from external factors such as the Ukraine-Russia military conflict and market expectations of the hawkish move by the Fed on FFR dragged the yields upwards. ECB confirmed that it would conclude its net asset purchases in 3Q2022, which opens up the possibility for a rate hike in the EU. The market anticipated a July rate hike and some members of the ECB are keen to raise rates sooner. BoE has hiked the rate three times since December 2021, bringing the interest rate back to the pre-pandemic level of 0.75%. Nevertheless, the market perceived that there was still space to raise the rate higher amid persistent inflation in the UK. The narrowing yield premium between CGB and UST bonds led to foreign investors selling Chinese debt. The soaring UST yields diminished the CGB yields advantage, making them less enticing to foreign investors as western central banks tightened monetary policies.

Malaysian Government Bond Market          

Total MGS/GII outstanding reached RM934.8 billion at end-April, representing a growth of 11.4% y-o-y. Net issuance throughout the month turned positive at RM8.5 billion (March: -RM4.0 billion), propelled by the MGS segment where no bond redemption was recorded. New issuance of MGS papers increased to RM10.0 billion from RM8.5 billion recorded in the previous month. Meanwhile, in the GII segment, new issuance came in higher at RM9.5 billion (March: RM5.0 billion) but was outpaced by a relatively high volume of maturities at RM11.0 billion. In April, local govvies remained under heavy selling pressure and booked a hefty monthly loss as the global bond rout intensified. The bearish tone in the bond market was further amplified amid the acceleration of inflation in major economies, which in turn sparked jitters about more aggressive Fed rate hikes and a slowing global economy.

Malaysian Corporate Bond Market          

Gross issuance of local corporate bonds rose to RM14.0 billion in April compared with RM12.6 billion recorded in March, marking its second consecutive month of gain. There was an increase in total rated issuances (including Cagamas) to RM10.3 billion from RM7.0 billion in the previous month, boosted by higher issuances in the financial services sector (Apr: RM5.6 billion; Mar: RM2.0 billion). The local corporate bond market also saw some selling, with yields across all rating spectrums rising 26bps to 50bps m-o-m. The jump in yields was more pronounced in the longer maturities, in tandem with the steepening MGS curve. 
 
MARC Rating Activities          

MARC Ratings assigned a preliminary rating to one issue into MARC Ratings' universe in April, together with an increase in rating migration activities. MARC Ratings has upgraded TSH Sukuk Murabahah Sdn Bhd's RM150 million IMTN Programme rating to AA-IS from A+IS.  In addition, MARC Ratings has downgraded the ratings of Serba Dinamik Holdings Berhad's IMTN and ICP programmes from  CIS/MARC-4IS to a default rating of  DIS. MARC Ratings has withdrawn its ratings on Kinabalu Capital Sdn Bhd's Issue 1 and Issue 2 MTN and Commercial Papers (CP) under the RM3.0 billion MTN and CP Programme.

Foreign Holdings of Local Bonds          

April saw the local bond market record net foreign outflow for the second consecutive month at RM2.2 billion (Mar: RM4.0 billion) as the global bond rout intensified. The share of foreign holdings to total outstanding in MGS shrank further to 37.6% (Mar: 38.8%). Meanwhile, foreign holdings of GII and corporate bonds contracted slightly to 10.3% (Mar: 10.4%) and 1.7% (Mar: 1.8%) in April. In contrast, the net inflows into MTB and MITB expanded the share of their foreign holdings to 54.9% (Mar: 53.7%) and 20.4% (Mar: 17.7%).

Related