CIMB Daily Fixed Income Commentary - 27 October 2014

Market Roundup

• US Treasuries mildly strengthened and yields barely moved Friday amid higher demand for safe-haven assets after a doctor in New York City was tested positive for Ebola. However, the 10T yield still closed higher by 7bps week-on-week.
• USD/MYR was slightly higher on Friday despite continued rise in UST yields and coming ahead of the FOMC meeting this week. The FOMC is highly anticipated to announce the end of the QE3 asset purchases program this week. We see a range of 3.25-3.28 in the week ahead. Buying on dips within this range is recommended but MYR is expected to strengthen against G7 currencies on the crosses.
• Trading flows along the Ringgit sovereign bond market was thinner, around RM1.6 billion versus RM2.1 billion the day before, as interest remained low after the mid-week Deepavali break. We noted a good chunk of short dated MGS Aug’15 traded, with yields up 10bps to 3.35%. However, shorter-dated government papers remain firm, in our opinion, with yields hovering below 3.50% for papers maturing 2015-2017.
• Thai government bonds consolidated with yields hovering around levels earlier in the week (before Wednesday when Thai markets were closed for Chulalongkorn Day on 23 October 23). Meanwhile, there was support from offshore investors, who were net buyers of Bt3.7 billion of Thai bonds on the day. In contrast, offshore investors were net buyers of Bt737 million domestic bonds on 22 October.
• Indonesia Government bonds were traded rangebound although the market put some aggressive bids early on especially along the 20-year tenor. Meantime, volume was low and which caused yields to go down only 1bp across the curve. Offshore names were seen in the short-dated bucket (up to 2 years). Looks like players were still waiting for president Jokowi's cabinet announcement.
• Along the Asian dollar space, there was better interest for IG bonds but HY bonds underwhelmed, especially ROP and Indo sovereigns which saw prices down 0.10-0.25 points. We think investors were looking for safer bets, coming alongside improved US economic data overnight but which was tempered by rising Ebola threat in the US.