CIMB Daily Fixed Income Commentary - 12 September 2014

Market Roundup

• On Thursday, US Treasuries again weakened as players remained cautious ahead of next week’s FOMC meeting. Players may be expecting Fed officials will further provide hints of when the first hike in the Fed Funds Rate since the financial crisis would be.
• The Ringgit was firmer, but only just, hovering around 3.1975 late Thursday. The Ringgit remained buoyed by ahead of next week’s MPC meeting, but movement was rangebound as US dollar strength also came into play.
• There was thin trading of Malaysian government bonds for another day as we head towards next week’s MPC meeting. However, net buying activities dominated trading as players picked up selected papers, including the 5-year MGS (-3bps to 3.72%) on just RM80 million. Flows were led by off-the-run MGS Oct’16 which fell 13bps to 3.30% on RM290 million volume. Aside, there was mild net paying pressure along the IRS segment. The 5X5 swap spread widened to 33bps from 30bps on Wednesday.
• On Thursday, Thai government bonds saw limited supported with the USD/THB limiting its upside as we head towards next week’s MPC meeting which we don’t expect any changes to monetary policy. As is, policy already looks accommodative and coupled with expected sustained fiscal spending would support the economy in the coming 6-12 months.
• The IDR bond market was offerish and moved lower ahead of the debt-switch auction, with the market traded in thin volume. However after the switch result announcement, where government only swapped IDR307 billion of bonds from Bt2.675 trillion of incoming offer, the market was slightly biddish especially on 10-year and 15-year benchmark series.
• Dollar and global bond markets were aided after overnight gains along US equities, but sentiment remained cautious ahead of next week’s FOMC. We are eager to hear if FOMC members further change their tune, pointing to a clearer picture of when they will start hiking interest rates.