The Thomson Reuters All Bond Index slumped further by 2.22 per cent to close at 146.856 point from 150.188 point last week as the weak sentiment continued to exert net selling pressures on the sovereign bonds and caused the MGS and MGII yields to spike by 23bps to 72bps across the curves.
Alongside the sell-off in the local bond market, the ringgit depreciated to 4.4165 against the US dollar from 4.2850 last Friday.
The overall bearishness observed in the global bond market was a result of the rippling effect from last week’s US presidential election as market players expect increased infrastructure spending as well as tax cuts promised by the president-elect Donald Trump will raise inflation and the possibility of a rate hike from the Federal Reserve in December has increased substantially.
Top 10 most active bonds:
The trade volume for the top 10 most actively traded bonds increased significantly to RM25 billion from RM9.4 billion recorded last week. The short-tenured MGS maturing on February 15, 2017 topped the table with RM4.6 billion changed hands.
Sovereign bond auction:
On November 14, 2016, the tender for the reopening of the seven-year benchmark MGII maturing on July 7, 2023 closed with a bid-to-cover ratio of 2.205 times. The highest, average and lowest yields came in at 4.14, 4.094 and 4.047 per cent respectively.
New Issuance(s):
On November 14, 2016, Malayan Banking Bhd issued a 15 non-call three-year bond with an issuance size of RM600 million. The coupon rate is 4.20 per cent. The bond is rated AAA with a stable outlook by MARC.
On November 18, 2016, Alpha Circle Sdn Bhd issued one-year and six-year Islamic Medium Term Notes (IMTN) with a total issuance size of RM 105 million. The IMTNs carry profit rates of 4.85 and 5.7 per cent respectively and are rated AA-IS with a stable outlook by MARC.
Rating Action(s):
On November 14, 2016, RAM Ratings has downgraded the rating of Development Bank of Kazakhstan Joint-Stock Company’s sukuk from AA2 to AA3 while maintaining the stable outlook.
The downgrade was in tandem with the downgrading of Kazakhstan’s sovereign ratings on the Malaysian-scale as the sukuk’s rating is equated to the country’s sovereign rating given the high likelihood of government support.
The downgrade in Kazakhstan’s rating reflected the persistently low oil prices and the country’s increased susceptibility to external conditions amid the recent change in its monetary policy, which has affected economic growth.