CIMB MYR Weekly Fixed Income Commentary for 28 February 2014

Attached is the weekly market highlights for February 28, 2014:

Market Roundup

• Malaysian Government Bonds posted marginal gains last week. There were hints of foreign players’ net buying interest mid-week, but overall gains were muted as we await Bank Negara’s Monetary Policy Committee (MPC) meeting slated for 6 March 2014.
• Corporate Bond trading activity picked up, seeing average daily volume of over RM400 million compared with RM300 million per day the prior fortnight. However, we noted interest was slanted along higher grade AAA papers with shorter term maturities. Seeing relatively heavier flows include AAA Sime Darby Nov’16, traded down 1bp to 3.84%.
• Along the ABS segment, only small amount of Cagamas IRMBS Aug’15 was dealt (RM5 million volume), rising 7bps to 3.69%.
• Ringgit IRS rates dipped as US Treasury yields fell, but only slightly as cautious trades came ahead of the 6 March MPC meeting. The 5-year IRS was down 4bps week-on-week.
• US Treasuries gained as players took to safe-haven buying and upon hearing Janet Yellen’s first testimony to the Senate Banking Committee as head of the Federal Reserve. Yellen stuck with the Fed’s current outlook for monetary policy, and provided little insight on whether the recent weaker economic data were due to the cold weather conditions. Meanwhile, the escalating political crisis in the Ukraine also drove safe haven buying, as well as release of weak economic data.
• Asian dollar bonds received good buying interest ahead of the weekend, especially sovereign papers, with strong gains seen along Indonesian names. We noted longer tenor Indo sovereigns picking up around 200 points on the week, as investors picked up bargains after the recent sell-off. In addition, investors turned towards the secondary market amid the lack of fresh primary deals. However, we think gains along the Rupiah so far this year and the outlook for the country’s improving trade balance were additionally spurring the interest for dollar denominated Indonesian papers.