CIMB Daily Fixed Income Commentary - 02 September 2014

Market Roundup

• US market closed on Monday’s Labor Day.
• On Friday, market focus was along the 10-year papers such as MGS Jul’24 and GII May’24, which were both actively transacted at a combined volume of RM1.1 billion throughout the day. Apart from that, MGS benchmarks moved in sideways amid lacking of major market catalyst at this juncture. We expect players to maintain cautious tone ahead of September MPC meeting.
• Thai govvies benchmarks closed on slight weaker tone on Monday. On the other hand, off-the-run govvies hovered at prior levels, while moving in tight range of 1-2bps throughout the day, amid quiet market.
• IDR denominated government bonds turned to negative on Monday. We suspect some players took profits. There were important economy data released on the day. As expected, inflation rate was slower in August about +0.47% MoM or +3.99% YoY from +4.53% YoY in the prior month, near to estimated figure of 4.01% YoY. Meantime, trade balance in July surprisingly posted surplus totaling USD124 million, whilst economists had anticipated a deficit of USD406 million. Players will focus on today’s auction.
• Asian dollar credits firmed on quiet market ahead of weekend. China Orient 5- and 10-year papers were seen quoted around 229 and 267bps, compared to 226 and 276bps a day before. Meanwhile, Link Reit 10-year paper was 1bps wider at 136bps. We think that investors were sidelined at this juncture and awaited for new issues from the pipelines in coming weeks.