CIMB THB Weekly Fixed Income Commentary for 15 May 2015

Market Roundup

• Thai government bonds showed late strength last week, with yields marginally lower ahead of today’s 1Q2015 GDP release. Although some pricing in of a weak GDP reading was probably in order, we think players are not fully pricing in another BoT rate cut (after the last two consecutive cuts).
• That said, 1Q2015 GDP was mixed-to-firmer. On yoy basis, growth was 3.0% or lower than earlier consensus of +3.4%, but qoq was better than expected at +0.3% against earlier expectation of -0.6%.
• Global investors were larger net sellers of Bt14.9 billion of THB denominated bonds last week. We think some reversal may occur this week, especially as the Baht is firmer around 33.55 currently. Trend will start along the IRS segment, with players expected to limited net receivers this week – expect to see 5-year IRS down another 0-5bps.
• Lastly, corporate bonds trading were razor thin at just Bt2.6 billion all week. Even though net buying interest dominated the floor, sentiment remained cautious following the small govvies movement and ahead of today’s GDP data release. In the short term horizon, we continue to favor shorter tenor bonds. Last week, higher grade papers were in demand, including TLT174 which fell 20bps last Thursday to 2.12%.