CIMB THB Weekly Fixed Income Commentary for 22 May 2015

Attached is the weekly market highlights for May 22, 2015:

Market Roundup

• Thai government bond yields fell 5-7bps last week, after reaching their highest levels since last December, following the decline in US Treasury yields middle of last week. However, we note UST yields backed up last Friday whilst USD/THB continued to weaken, hovering above 33.50. Which makes us think THB govvies yields will show a mild increase this week. However, we expect swap rates to show some strength to sustain their present levels, ahead of the June MPC meeting in a couple of weeks’ time. This week, our target for the 10-year THB govvies is 2.90% but stop-loss at 2.68%.
• US Treasuries weakened ahead of last weekend as Janet Yellen was heard saying "it will be appropriate for raising the Fed Funds Rate target this year, if the economy continues to improve as expected’. We continue to think the Fed will act near end-year if it decides to raise rates.
• Also in focus this week is the LBA37DA auction, already indicated at a size of Bt10 billion, which is schedule on May 27.