BPA Malaysia weekly bond market report 5 November 2017

The US Federal Reserve had decided to keep its benchmark interest rate unchanged during the Federal Open Market Committee (FOMC) meeting on Wednesday.

However, it signaled a possible rate hike in December, citing that the economy has been expanding at a solid pace and on the back of a strengthened job market.

Meanwhile, as widely expected, President Trump had nominated Jerome Powell as the next Fed chairperson to replace Janet Yellen when her term expires.

Over to the UK, the Bank of England (BoE) raised its interest rate by 25bps to 0.50 per cent for the first time since a decade ago, indicating concerns on the rising inflation and projected a “very gradual” further tightening over the next three years.

Despite these risk events throughout the week, the Ringgit bond market registered a 0.107 per cent gain in the TR BPAM All Bond Index to close at 154.554 points from 154.389 points last Friday.

The MGS curve steepened as the 10-year and below region saw yields eased by one bp to sixbps while yields in the 15-year to 25-year region edged up by one bp to 11bps.

On November 3, 2017, the Department of Statistics Malaysia released the external trade statistics for the month of September 2017. Exports grew 14.8 per cent to RM78.3 billion while imports expanded by 15.2 per cent to RM69.7 billion from a year ago.

As a result, trade surplus was recorded at RM8.6 billion. The total trade volume of the top 10 most actively traded bonds declined to RM6.3 billion from RM9.4 billion last week.

The seven-year benchmark MGS maturing on September 30, 2024 and short term off-the-run MGS maturing on March 1, 2018 topped the list with a total of RM1.9 billion changed hands.

On October 30, 2017, Perbadanan Kemajuan Negeri Selangor (PKNS) issued a RM100 million one-year IMTN with a profit rate of 4.45 per cent.

The IMTN is rated AA3 with a stable outlook by RAM Ratings. On October 31, 2017, Southern Power Generation Sdn Bhd issued 28 tranches of IMTN with tenures ranging from 4.5 years to 18 years.

The total issuance size is RM3.665 billion with profit rates from 4.70 per cent to 5.61 per cent. The IMTNs are rated AA- IS with a stable outlook by MARC.

On November 3, 2017, Cagamas Bhd issued three tranches (one, three and five-year) of IMTN which amounted to RM955 million and another tranche of 3-year MTN worth RM1 billion.

The IMTNs carry profit rates of 3.7 to 4.23 per cent, while the MTN carries a coupon rate of four per cent.

All Cagamas issues are rated AAA with stable outlook by RAM Ratings and MARC.

On November 2, 2017, RAM Ratings upgraded the long-term financial institution ratings (FIRs) of Hong Leong Bank Bhd (the Bank) and Hong Leong Islamic Bank Bhd (HLISB) from AA1 to AAA, and concurrently revised their outlook to stable from positive.

The rating upgrade is primarily premised on Hong Leong Bank’s sustained track record of excellent asset quality across credit cycles, robust funding and liquidity position, and respectable domestic retail and SME franchises.

Furthermore, the rating of HLISB was upgraded given its strategic role as the Islamic banking arm of Hong Leong Financial Group Bhd, which in turn is anchored by the ratings of the Bank.

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