Looking at the Top 10 most active bonds, all of the top 10 bonds traded during the week were MGS and GII as well as BNM notes, which are all sovereign papers, continuing the trend from prior weeks.
With regards to the All Bond Index Performance, weekly gain was 0.2 per cent from 122.33 to 122.57 points. The bullish flattening trend continued to be seen in the government securities section as well as government guaranteed issuance.
The downward pressure on bond yields mimicked that seen in the US Treasury, where global economic concerns continued to drag US Treasury yields to new lows.
Further boosting the bond market was the release of Malaysia’s key economic data on August 15, 2011 where Malaysia’s economy recorded a growth of 4.0 per cent in the second quarter of 2011 whilst the July CPI recorded a lower than expected 3.40 per cent.
The largest issuance seen for the week was by a financial institution. Malayan Banking Bhd issued RM2 billion worth of 10 non-call five year subordinated debts on August 15, 2011.
The subordinated debts, which are rated AA1 by RAM Ratings, were issued with a coupon rate of 4.10 per cent.
On 18 August 2011, Malaysia Ratings Coperations Bhd (MARC) downgraded sukuk issued by Tanjung Langsat Port Sdn Bhd (TLP) to A-IS and MARC-2ID/A-ID from AA-IS and MARC-1ID/AA-ID.
The outlook on the ratings remain negative.
The downgrades reflected the erosion of TLP’s credit and operating profile during 2010 due to the prolonged effects of a fire incident in 2008 at its tank terminal complex and its depleting unencumbered land bank.
MARC foresaw that TLP would require further financial support from its parent, Johor Corporation Bhd (JCorp) to maintain compliance with its financial covenants.
However, to note, JCorp’s probability of providing liquidity support to TLP was low to moderate in light of its own heavy debt burden.