Tuesday, October 15

BPA Malaysia Weekly Bond Market Report 21 September 2014

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Over the week, the Thomson Reuters BPAM All Bond Index rose 0.21 per cent to end the week at 136.28 from 136 last week. This week was packed with market-moving news—from Fed’s  FOMC meeting, Bank Negara Malaysia’s (BNM) MPC meeting to Scotland’s independence referendum.

On September 19, MGS yields dropped up to eight bps for the three to 10-year tenure following the conclusion of BNM’s penultimate MPC meeting for the year. In its Monetary Policy Statement, BNM cited that domestic demand will remain as the key driver of growth but is expected to moderate going forward. Inflation is projected to remain relatively stable for the remainder of the year but is expected to edge higher next year.

BNM reiterated the current level of OPR remains supportive of growth and will continue to monitor the balance of risks between growth and inflation outlook.

On September 17, the Fed to decided to maintain the pace of its QE tapering and is expected to wind up the QE in its next meeting. It also vowed to keep the interest rate low between zero and 0.25 per cent for a considerable time but is expected to hike the interest rate at a much steeper pace once the rate hike cycle has started.

The has pressured the Malaysian ringgit exchange rate against US dollar, which ended the week at 3.2340, depreciated from 3.1975 last week.

Also on Wednesday, the Malaysian Department of Statistics released the August inflation data as measured by the CPI, which rose 3.3 per cent year-on-year, a tad above 3.2 per cent in July.

On Friday, the referendum result showed that Scotland nationals had voted against independence (55 against 45 per cent) from the UK. The result has put to rest the market uncertainty that had entailed from it.

The turnover for the top 10 most actively traded bonds deteriorated slightly by 4.3 per cent to RM10.8 billion due to the Malaysia Day holiday on Tuesday. Sovereign issues continued to dominate the list.

On Wednesday, the Government of Malaysia announced the re-opening tender for the 30-year benchmark MGS maturing on September 30, 2043 with an issuance size of RM2 billion. The tender closed with a tepid bid-to-cover ratio of 1.365 times. The lowest, average and highest yields were 4.665, 4.715 and 4.769 per cent respectively.

On Wednesday, Ara Bintang Bhd issued one tranche of senior MTNs worth RM330 million with a coupon rate of 4.48 per cent callable on September 17, 2019 (coupon rate will step up to 5.48 per cent from the call date until its legal maturity date on March 17, 2021 if it is not called). On the same day, Ara Bintang issued another tranche of junior floating rate MTNs worth RM730 million with the same call date and legal maturity date as the senior MTNs.

On Thursday, Quill Retail Malls Sdn Bhd issued two tranches of AAA-rated bank guaranteed MTNs with a coupon rate of four per cent and one tranche of AAA-rated Danajamin guaranteed MTNs with a coupon rate of 4.15 per cent. The total issuance size is RM40 million.