CIMB Daily Fixed Income Commentary - 11 July 2014

Market Roundup

• US Treasuries posted gains on the front end of the curve, led by buying interest due to the risk-off sentiment, as players showed concerns on the Portuguese banks’ debt issues.
• Bank Negara Malaysia hiked the OPR by 25bps to 3.25% on Thursday, and pointed that growth path remained firm, while inflation remained higher than its long-run average, led by higher domestic cost factors. We view that the policy stance sounded neutral at this juncture. Going forward, the policy direction will depend on the assessment of growth and inflation, as well as risks of financial imbalances.
• THB denominated bonds posted little gains, as both local and foreign players were seen actively net buying the government bonds, pressuring the yields lower by 1-3bps on Thursday. Market sentiment turned positive after the central bank forecasted the GDP to grow at 3-4% in the second half of the year. Meanwhile, market focus was on LB196A, which was seen traded 3bps lower to 3.17%, with a total trading volume of Bt5.4 billion throughout the day.
• IDR denominated government bond market gained significantly on Thursday particularly along long end of the curve. The market reacted to quick count results of presidential election. Although the results were mixed, players seemed to be confident with most of results which stated Jokowi have won in the election. The strengthening was in line with stock market and also rupiah exchange rate on the day. We see that the market may continue its strengthening. However, we expect some players may take profit amidst significant positive movement.
• Asian dollar credits were traded firmer, as market was comfortable with the accommodative stance of the June FOMC minutes. DBS new issue maturing 2019 was seen 1bp tighter from the reoffer spread of 58bps, while China Huarong 3-year and 5-year tranche was quoted 18 and 3bps tighter to 197 and 232bps respectively.