CIMB THB Weekly Fixed Income Commentary for 29 May 2015

Market Roundup

• Though volume traded was smaller, Thai government bonds posted a second consecutive week of steady gains with yields down 5-7bps along the bellies of the yield curve (after yields had found their way to their highest since last December a couple of weeks ago). A dip along US Treasury yields supported sentiment in the domestic market, with foreign investors being net buyers of Bt2.1 billion of baht-denominated bonds last week.
• Up next we have the Bank of Thailand MPC meeting slated for 10 June. Last week, central bank deputy governor Paiboon Kittisrikangwan stated that the current monetary policy is highly accommodative, while a further rate cut may not help much in stimulating economic growth.
• However, last week, we noted weak economic data including April custom exports down 1.7% yoy though better than earlier consensus of -3.30%. Thailand’s exports shrank 4.69% in 1Q2015 whilst imports fell 6.53% from a year ago. The country’s trade balance fell to a deficit of $523 million in April versus a surplus of $1,495 million the month before. This week, macro data include the May CPI with consensus of a deflation of 1.12% yoy against -1.04% the month before.
• This week, seeing the weak macro data and recent gains along the UST, we expect rangebound trading along the government bond market, though we expect some decline (up to 5bps) along swap rates as we head closer to next week’s MPC meeting.
• Elsewhere, corporate bonds showed firm gains on pretty active volume. Total outright trade of corporate bonds was Bt14.2 billion last week, up from Bt8.2 billion the week before. Sentiment was boosted by the firm govvies trading. We noted gains along longer dated papers, including CPALL26DA which shed 10bps last Friday.