Malaysian Bonds


A run-up in the ringgit and robust demand for the 5-year MGS reopening resulted in benchmark government bond yields ticking lower towards the end of the week, recouping losses incurred at the beginning of the week. The ringgit had inched towards RM3.44 on renewed speculation that the ringgit would become tradable offshore soon.
In mid week, strong appetite for RM-denominated assets resulted in a decent oversubscription rate for the RM3-billion MGS reopening, which generated a bid-to-cover ratio of 2.57 times, slightly lower than the 2.86 times on the 3-year MGS reopening last month. The average yield was 3.407%.
This week, we expect to see the release of the March CPI. A high base last year will result in a low year-on-year rise in the March inflation reading. According to the Bloomberg consensus, the March CPI would come in at a 1.9% rise, sharply lower than February's 3.1% uptick.
The back-end of the IRS curve was lifted slightly last week as the constant rhetoric from government officials reinforced the view that a rate cut may not be in the offing.
Trading in corporate bonds shrank a little last week as investors were engrossed with the reopening of the 5-year MGS benchmark. Activities only picked-up towards Friday, after the tender.
The most liquid AAA-rated name, the Rantau Abang bonds, were dealt with a slight downward yield bias. Generating the highest volume over the week were the 12s, which were seen edging 1bp higher to settle the week at 3.8%. There was also strong demand for Khazanah Dec'16 which was last reported done at 3.66% (+1bp).
The new AA1-rated Maybank 10nc05 4% subdebt maturing Apr'17 was last reported done at 4.38%. Proceeds will be utilised to fund Maybank's general banking and financing activities. KL Sentral's new bonds, which were issued to refinance its existing Islamic financing facility, debuted. Similarly, we noted the appearance of the MTD Infraperdana bonds on Friday.
In domestic news, Malayan Banking Bhd is selling a US$300 million 10nc05 Sukuk. Proceeds of the issuance will be used to fund the bank's Islamic banking operations and for general Islamic purposes. Specifically, Maybank plans to refinance the existing conventional dollar-denominated subordinated notes. The offering is rated Baa1/BBB+ by Moody's and S&P.

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