CIMB Daily Fixed Income Commentary - 18 May 2015

Market Roundup

• US Treasury yield curve ended flatter, guided by series of disappointing economic releases announced on Friday. Empire Manufacturing Index improved from -1.19 to 3.09 in April, still below consensus estimate at 5.00, while Industrial production recorded a fifth consecutive decline of 0.3% in April.
• Malaysian government bonds closed firm but on relatively light volume Friday. There was muted reaction from the release of slightly better-than-expected 1Q2015 GDP data, but players were still mildly buoyed by the prior day’s 3-year GII auction. In economic numbers, the 1Q2015 GDP was slightly ahead of consensus at +5.6% yoy (consensus: +5.5%). However, the 4Q2014 was revised downward to +5.7% (+5.8% prior estimate). The latest quarterly GDP was boosted by firm private sector consumption and investment activity but was tempered by a moderation in exports.
• Thai government bonds mildly strengthened with yields down 1-2bps on the day. We think domestic players were still net buyers as foreign players were net sellers of Baht denominated bonds to the tune of Bt4.9 billion Friday.
• Indonesian government bonds  were traded weaker, post-trade balance data release, as the data shows April trade surplus number at US$454 million, better than expected (+$77 million) but lower than previous month (+$1,132 million). The higher trade surplus number was because of April export shrinking compared to April’s imports. The market reacted by selling some of benchmark bonds in all tenors causing YC to go down 5-8 bps initially, however market well supported with some bids appeared and pushed prices up although lower than opening, limiting the downside. Trading volume eased to IDR12.5 trillion.
• Asian dollar bonds continued to see a lack of interest, but traders saw a noted increase for pick up along longer dated bonds, boosted by recent surge in US Treasury yields. Meanwhile, sovereign CDS papers were also benefitting from the renewed interest. Levels were about 2-5bps tighter Friday for Malaysia, Thailand and Indonesia 5-year CDS.