CIMB THB Weekly Fixed Income Commentary for 24 Jul 2015

Market Roundup

• The Thai Baht remained weak hovering near 34.85 currently after testing the 34.80 this morning. The latest trade data disappointed and this brings forth increased expectation of a BoT rate cut come the MPC meeting on 5 August. This afternoon, the Jun custom exports numbers released showed a larger than expected decline of -7.87% against -4.60% consensus and the -5.00% decline the previous month. However, custom imports fell by a smaller than expected -0.21% in Jun against -7.35% consensus and the prior month’s -20.0%.
• Last week, Thai government bonds remained under pressure as the Baht remained weak. The USD/THB pair surged to hover just below the 35.00 level (USD/THB closed last week at 34.918).
• In the coming week, we expect govvies yields to show small 0-5bps declines across the yield curve as we head closer to the MPC meeting. Our short term target for the 10-year govvies is 2.75%.
• The 5-year Thai bond-swap spreads widened to about -17bps last week from as little as 8bps mid-month. We expect further widening ahead of the MPC meeting. Our short term target for the 5X5 swap spread is -22bps.
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