RESEARCH REPORT

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

Report ID 60538900387 Popularity 594 views 22 downloads 
Report Date Nov 2021 Product  
Research Type Fixed Income BM Update Sector Bond Market Update - Bond Market Update
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Rationale
Global Markets     

In September, the Fed set the stage for swifter rate hikes and commencement of its tapering plan. The Fed’s strong hawkish signal has roiled global bond markets. Investors were also gripped by mounting fears over the inflation outlook. In contrast with other major central banks, the ECB maintained its dovish stance on interest rates in September. In the UK, the BoE delivered a hawkish shift similar to the Fed, suggesting that it could hike rates before the end of 2021. However, yield spikes were more pronounced in the UK compared to other major bond markets. The BoE has indicated that it would raise rates ahead of the US Fed. In China, the Evergrande debt crisis had minimal impact on the CGB market. The sell-off was mainly concentrated on China’s offshore high yield market, especially on heavily indebted developers. At end-September, CGB yields along the belly to the long end rose slightly higher amid growing inflationary pressures. However, CGB yields at the short end of the curve declined as fresh COVID-19 outbreaks led to heightened expectations for liquidity support from the PBOC. 

Malaysian Government Bond Market    

Gross issuance of MGS/GII was a tad higher in September which amounted to RM14.0 billion (Aug: RM13.5 billion). New supply of MGS and GII were valued at RM5.5 billion and RM8.5 billion. At auction, bidding interest was mostly concentrated on GII with both the 20y GII 09/41 and the 5y GII 03/26 commanding BTC ratios of above 2x. Meanwhile, the 10y MGS 4/31 drew a weak BTC ratio of 1.6x as sentiment in the secondary market turned bearish. The increasing hawkish tilt in policy stances by the US Fed and some major central banks in September has jolted the MGS market. MGS were also pressured by supply concerns while foreign demand is expected to decline on the global push for the removal of pandemic-era stimulus aids. As at end-September, the MGS yield curve extended its bearish flattening trend from the previous month. Yields along the 3y15y curve rose by 13bps to 25bps while both the 20y and 30y yields only rose by 6bps to 7bps. 

Malaysian Corporate Bond Market     

Gross issuance of long-term corporate bonds was higher at RM10.8 billion in September (Aug: RM8.3 billion). Growth was underpinned by a heavy supply of new issuances from unrated corporate and quasi-government bonds worth RM2.6 billion and RM4.7 billion (Aug: RM0.4 billion and RM2.5 billion). However, gross issuance of rated corporate bonds declined to RM1.5 billion (Aug: RM4.8 billion). In September, the prospect of a more hawkish monetary policy also pushed corporate bond yields higher. Meanwhile, their credit spreads tightened as local govvies took most of the brunt of the global bond rout. Heightened foreign demand for corporate bonds has cushioned the impact of the sell-off despite the Evergrande contagion fear. 

MARC Rating Activities     

In September, MARC assigned initial ratings of AA+IS/Stable and AA-IS/Stable to UMW Holdings Bhd’s RM2.0 billion IMTN and RM2.0 billion Perpetual Sukuk Programmes. MARC also affirmed a total of 14 issue ratings from 11 different issuers with their outlook remaining unchanged. Meanwhile, the issue ratings for Serba Dinamik Holdings Bhd and MEX II Sdn Bhd remain under MARCWatch Negative.

Foreign Holdings of Local Bonds     

In September, net foreign inflows in local bonds narrowed significantly to RM0.6 billion (Aug: RM6.6 billion) following the global bond rout. Foreign holdings amounted to RM251.1 billion (Aug: 250.4 billion), equivalent to 14.6% of total outstanding local bonds (Aug: 14.6%). The inflows in September primarily came from GII worth RM2.1 billion. Meanwhile, MGS recorded a net foreign outflow of RM2.4 billion, offsetting most of the total net foreign inflows into the local bonds. 
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