CIMB Daily Fixed Income Commentary - 02 Jun 2015

Market Roundup

• US Treasuries weakened with a pretty sharp rise in yields on Tuesday. This came after the bond yields rose in Europe (up more than 10bps). Ongoing talks between European leaders with Greece and prospects for a deal to avert a default by Greece resulted in a rise in risk appetite in Europe. The 10-year German government bonds was heard rising 17bps to 0.71%.
• The Euro showed strength on Tuesday. The major boosts for the Euro Zone currency were a rosy inflation report and hopes ongoing talks between European leaders with Greece will avert a default by Greece. Also, pressuring the US dollar was caution ahead of this week’s jobs report. Euro zone core CPI rose 0.9% yoy in May against earlier consensus of +0.7% and the prior month’s +0.6%. On Tuesday, Asian currencies remained subdued against the US dollar amid a lack of fresh drivers to boost regional sentiment. However, some gains were seen overnight. USD/MYR was near 3.6810 this morning versus 3.6965 Tuesday.
• Malaysian government bond market saw heavier trading volume totalling RM3.4 billion, led by short dated names in both MGS and GII space. GII Feb’16 was actively traded on Tuesday, while yield closed higher at 3.11%. Benchmark MGS papers closed sideways for the day amid a still lack of fresh market drivers.
• Thai government bonds reversed some gains posted last week, reacting to the higher UST yields after the market reopened on Tuesday. Meantime, front end of the curve was well supported, after the May CPI showed a larger margin contraction of 1.27% on a year-on-year basis, against 1.10% decline forecasted earlier.