Highlights

Last week, 10yr-UST was down by 5 bps to 2.47%, from the two-year high of 2.75% on 08 July 2013. It seems that U.S Treasuries sell-off may have waned off for now as they seek equilibrium. On the other hand, the MGS yield curve have spiked up since the 17 May 2013 (pre-tapering talk) by average 51 bps for the more liquid tenors (1-10 years), which we feel that slightly overdone as compared to the previous Lehman crisis in 2008, where the yield have spiked up by average 89 bps and subsequently corrected to 63 bps a month later. As mentioned by Fed Chairman, tapering is not tightening of monetary policy. Therefore, we feel that the bond market is expected to normalize in due course.

The new RM3.5 billion 3-year GII MURABAHAH (07/16), which is the new 3-year GII benchmark, has attracted a strong demand (2.92 times book-to-cover) with the average yield at 3.389%.

Malaysia Inflation rate remained stable in June 2013, with CPI at 1.8% (May 2013: 1.8%).

Market data watch for this week:- Australia CPI yoy (forecast 2.5% vs previous 2.5%) on 23 Jul 2013; New Zealand Interest Rate Decision (forecast 2.5% vs 2.5% previous) on 24 Jul 2013; and U.K. GDP yoy preliminary release (forecast 1.4% vs previous 0.3%) on 25 Jul 2013.

Fixed Income Securities

On the govvies market, benchmark yields were traded higher, such as MGS 07/16 (+15 bps), MGS 03/20 (+27bps) and MGS 03/23 (+10 bps), with trading volume of RM6.31 billion, RM0.38 billion and RM1.45 billion, respectively. The most active traded securities were MGS 07/16, GII 07/16 (3-year GII benchmark) and MGS 03/23, with trading volume of RM6.31 billion, RM2.31 billion (including WI) and RM1.45; and yield closed at 3.39%,  3.39% and 3.79%, respectively.

On the local PDS (including quasi-) market, trading volume reduced further to RM1.83 billion vs RM2.54 billion the week before, and the actively traded securities were PLUS 12/38 (4.58%), PLUS 01/38 (4.54%) and PLUS 01/33 (4.73%), with trading volume of RM120 million, RM100 million and RM90 million, respectively.

Kinsteel Berhad had via an EGM held on 17 July 2013 obtained Noteholder's consent on the following; a) to waive the obligation to maintain the Minimum Required Balance for the Maturing CPs into the FSRA; b) to waive the breach of the Financial Covenants; and c) to waive the breach and/or any potential breaches to the Financial Covenants till maturity of the CP/MTN Programme. (FAST) Putrajaya Holdings Sdn Bhd ("PJH") (AAA) have obtained approval from bondholders in respect of PJH's request to early redeem all the remaining outstanding principal of the RM850 million BBA Secured Serial Bonds on or before 31 July 2013. (FAST)

Konsortium ProHAWK Sdn Bhd (AA2) had issued a notice to Sukukholders to call for an EGM to be held on 31 July 2013. The EGM shall deliberate on some proposed amendments to the principal terms and conditions of the Sukuk Murabahah Programme. (FAST)

RAM Ratings opines that 1MDB's recently announced proposed acquisition of a 75%-stake in Jimah Energy Ventures Sdn Bhd (“JEV”) has no immediate rating impact on either JEV’s RM4.85 billion Senior Islamic MTN Facility (AA3) or Special Power Vehicle Berhad’s RM800 million Class A Islamic MTN Facility (A1). (RAM)

Global News

Federal Reserve Chairman Ben S. Bernanke said the central bank’s asset purchases “are by no means on a preset course” as he sought to tamp down an increase in borrowing costs that threatens to slow the economic expansion. (Bloomberg)

China slowed to 7.5 % growth (as estimated) in the second quarter, putting the economy on track for its weakest year since the late 1990s as the country’s new leaders focus more on deep reforms than short-term stimulus. (FinancialTimes)

Bank of Canada Governor Stephen Poloz kept his main interest rate unchanged (1.00%) at his first policy decision and said there will be a “gradual normalization” of borrowing costs over time as slack in the economy disappears and inflation picks up. (Bloomberg)

The U.K. CPI inflation increased to 2.9% in June 2013 (lower than the 3% expected by markets), up from 2.7% in May 2013, which was at a 14-month high. (BBC)

Mizuho Bank (Moody's A1) launched Y100bn of 5-year straight bonds via Mizuho Sec. The new paper carries a 0.395% coupon. (Reuters)

Standard & Poor's had affirmed its AAA unsolicited sovereign credit ratings on the Commonwealth of Australia. (Reuters)

Fitch Ratings has cut its credit grade for European Financial Stability Facility to AA+ from AAA, as a result of its downgrade of France rating the week before. (Reuters)

The U.S.’s Aaa credit-rating outlook was revised to stable from negative by Moody’s, which said the government’s debt trajectory has steadied with budget deficits narrowing. (Bloomberg)

Singapore banking sector received a rare caution after Moody's, revised downward its outlook to negative for the first time since the financial crisis over rapid loan growth and rising property prices in southeast Asia. (FinancialTimes)