Monthly Bond Market and Rating Snapshot - April 2020 - Full Report |
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| Report ID | 60530 | Popularity | 1866 views 31 downloads | |||||
| Report Date | May 2020 | Product | ||||||
| Research Type | Fixed Income Bond Market Update | Sector | Bond Market Update - Bond Market Update | |||||
| Price (RM) |
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| Rationale |
Global
Markets The
1Q2020 US real GDP expanded at its slowest pace since the GFC by 0.5% as the
COVID-19 outbreak took a toll on the economy. Last month, the US recorded the
largest number of COVID-19-related cases and deaths in the world. In Europe,
PMI for the manufacturing sector slumped to more than a decade low as
non-essential businesses were either shuttered or faced multiple economic
challenges. In the UK, consumer sentiment worsened to an all-time low while
manufacturers expect output to continue to fall in the next three months. In
China, the 1Q2020 real GDP contracted by 6.8%, driven by a broad-based decline
on the supply side. The financial and economic impact caused by COVID-19
resulted in a notable decline in international reserves and a record high
liquidity. Malaysian
Government Bond Market Gross
issuance weakened to RM14.0 billion in April after recording the highest
monthly issuance in history of RM16.8 billion in March. This brought the
2020YTD (Jan-Apr) issuance to RM52.8 billion (2019YTD: RM47.0 billion). In
tandem with the fall in yields across the maturity spectrum, demand for government
securities issued in March broadly improved. In the secondary market, MGS
yields ended April lower by 34bps to 58bps to their lowest levels YTD on
heightened expectations of further reductions in the OPR by BNM during its
scheduled MPC meeting on May 5. MGS were also supported by signs of lessening
COVID-19 infection rates in Malaysia, the recovery in global crude oil prices
as well as the Fed’s pledge to keep interest rates near zero and continue its
asset purchasing programmes. Malaysian
Corporate Bond Market In
April, gross issuance of long-term corporate bonds declined for the third
consecutive month to RM3.1 billion (Mar: RM7.2 billion) amid significant lower
issuances across all segments except for the Cagamas bond segment which rose to
RM0.5 billion (Mar: RM0.4 billion). The primary market for corporate bonds was
subdued by the extension of the MCO in Malaysia, which stymied economic activity.
YTD, gross issuance amounted to RM25.1 billion (2019YTD: RM37.5 billion) with
rated corporate bonds (excluding Cagamas) being the largest contributor with
RM8.6 billion. In tandem with local govvies, benchmark yields on
investment-grade corporate bonds also fell in April. Benchmark yields for AAA,
AA and A-rated corporate bonds fell by between 25bps and 61bps, in contrast
with March’s increase of between 36bps and 56bps. MARC
Rating Activities In
April, MARC assigned a preliminary rating of A+IS /Stable to Tropicana
Corporation Bhd’s proposed RM1.5 billion IMTN Programme. MARC also assigned
final ratings of MARC-1/AA- to Sunway Bhd’s RM2.0 billion CP/MTN Programme. In
the same month, MARC reaffirmed 11 issue ratings under eight different issuers
and revised the outlook on one issue rating from negative to stable. There were
no rating migration activities. Additionally, MARC extended its MARCWatch
Developing placement on PLUS’ RM23.35 billion Sukuk Musharakah Programme which
carries a rating of AAAIS /Stable. Foreign
Holdings of Local Bonds Foreign
selling pressure of local bonds eased in April but foreign investors remained
as net sellers of local bonds. In April, net foreign outflows from the local
bond market amounted to RM2.0 billion (Mar: RM12.3 billion), bringing the total
foreign holdings lower to RM185.8 billion (Mar: RM187.8 billion). GII accounted
for most of the outflows (RM1.9 billion). Foreign holdings of GII amounted to
RM18.6 billion (Mar: RM20.5 billion), equivalent to 5.3% (Mar: 5.7%) of total
outstanding GII. The first four months of this year saw total net foreign
outflows of RM18.8 billion (Jan-Apr 2019: -RM4.7 billion, 2019: +RM19.9
billion) from the local bond market. |
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