CIMB Daily Fixed Income Commentary - 30 October 2014

Market Roundup

• US Treasury yield curve ended flatter, as the short term yields surged by 7-9bps, after the Federal Reserve announced to fully unwind the QE. While the policy makers as widely expected to keep the policy rate at low levels of 0-0.25%, Federal Reserve shared its more optimistic view on the economic outlook, particularly in labour market.
• We noted better two-way flows in Ringgit sovereign bond market, aided by month-end portfolio rebalancing and some speculative bets ahead of FOMC meeting outcome. Total volume rose a tad higher by RM600 million to RM2 billion on Wednesday. However, the higher volume made little impact to drive the market.
• Thai sovereign yield curve steepened, led by cautious sentiment well ahead of FOMC meeting, alongside profit taking activities which continued to pare gains recorded earlier. Daily volume surged to Bt21.0 billion, compared to Bt12.5 billion garnered a day before, boosted by the dual auctions held.
• IDR government bond market ended weaker with better selling mode in the morning due to domestic issues such as uncertainty of fuel price policy, coupled with concerns of FOMC meeting outcome on late Wednesday. Yield curve shifted upward by 5-10 bps in earlier session, and eventually recovered after lunch time, supported by local players.  We are seeing local flows in the short end while foreign flows in longer part of the curve. We think market will stay in the range before the fuel price policy launched.
• Asian dollar credits moved in sideways, amid thinner flows, as market slanted towards wait-and-see mode ahead of the FOMC meeting outcome. In general, market is expecting the Federal Reserve to keep the policy rate at the low levels, given the concerns of slow pace of domestic inflation growth and weaker global growth prospects.