CIMB Daily Fixed Income Commentary - 09 April 2015

Good Morning,

Market Roundup

• US Treasury yields edged higher, while players noted mixed opinions in the latest FOMC minutes released on Wednesday, as some members viewed that “the positive economic data and outlook warrant the beginning of interest rate normalization in June.”
• Ringgit government bonds closed slightly weaker amid mixed US Treasuries close overnight and Malaysia’s release of lower foreign reserves numbers. Malaysia’s foreign reserves fell to US$105.1 billion as at 31 March versus US$109.2 billion on 13 March. The 10-year MGS was firm at 3.87% but there was strong interest along the new 10-year GII which ended the day at 3.98% or 11bps above the 10-year MGS. In the short term, we think a spread of about 10bps between the 10-year proxies (conventional versus Islamic) might sustain.
• Thai government bonds were supported with the THB currency also pretty firm hovering near 32.54 late Wednesday. Continued safe haven interest, ahead of this month’s MPC meeting also kept support on Thai govvies. Foreign players were large net buyers to the tune of Bt6.5 billion of Thai bonds Wednesday, on top of Bt6.8 billion net buy the day before. Last week, Deputy PM Pridiyathorn Devakula said exports in 1Q2015 may contract by 3.0% yoy and possibly reducing GDP growth by 1.6%.
• On Wednesday, Indonesian government bonds were traded up on offshore inflows, mainly along the 10-year maturities, with around 30% of the day's transactions dominated by FR70 (10-year benchmark). However, gains were pared as players were also waiting release of recent FOMC meeting minutes after hours. Trading volume improved to IDR10.2 trillion.
• Along the Asian dollar space, much talk was on possible first ever Chinese principal repayment default, of IT company Cloud Live CNY denominated bonds. However, the dollar market was little affected as the amount was pretty small. Overall, Asian dollar bonds saw spreads tightening along high grade names, boosted by pent-up demand from traders coming back from recent long public holidays and some excess liquidity.