RHB FIC Rates & FX Market Update - 29/4/15

29 April 2015

Rates & FX Market Update

USD Continues Bearish Trend, AUD Soars; FOMC Statement May Remain Dovish

Highlights

¨                   

¨    The UST curve bear steepened with 10y yields climbing towards 2% amid the 2 day FOMC meeting. With no press conference scheduled, we opine the Fed may raise concerns on the slower recovery and easing CPI in the FOMC statement, furthering bearish momentum in the USD alongside a gentle paring down of crowded long positions. Moderating USD strength will be balanced by a steady growth trajectory in US, where we see opportunities to add on dips in small clips. In EU, the EUR closed in towards 1.10/USD while peripheral EGBs rallied as investors remained hopeful of a Greek bailout resolution following the reshuffling of the negotiation team.

¨     Meanwhile, KTB yields climbed higher by 4-8bps following the release of April’s BoK minutes as the overall tone was less dovish with BoK comforted by the improving consumer sentiment, signalling the Bank’s reluctance to cut rates barring further deterioration. Elsewhere, the sedated recovery in Thailand is likely to build the case for another BoT rate cut this year, dragged by the deeper political divide following the new constitution; maintain mild overweight on ThaiGBs on lower rates. Demand for the inaugural SGS mini auction was firm, with a BTC of 1.86x and cutoff yields at 1.21%, 2bps higher than the secondary traded paper. Separately, MAS macroeconomic review concluded with expectations for a firmer G3 to underpin Singapore’s 2015 growth, where we opine MAS to likely maintain status quo in the upcoming October MPS meeting supporting the short term bullish momentum in SGD amid the softer USD.

¨    AUD soared by 2.26% overnight to 0.8026/USD, as RBA’s Stevens held back from commenting on RBA’s monetary policies alongside the persistently softer appetite for USD. Earlier efforts by RBA to talk down the AUD appears to have stalled following RBA’s hesitation to cut rates where we caution investors on adding further shorts on AUD until further clarity is seen from FOMC’s rate hike schedule.