CIMB Daily Fixed Income Commentary - 15 Feb 2016

Market Roundup

• US Treasury yields surged, amid stronger risk-on sentiment following the sharp rebound in crude oil prices and stock markets. Brent crude oil rose significantly by almost 11%, guided by renewed speculation on supply cut by oil producers.  Last Friday, Brent rose to close at $33.91 per barrel from just above $30 the day before, whilst the Dow Jones Industrial Average index rose by just over 300 points.
• On the other hand, economic data were mixed on Friday. Retail sales expanded by a faster-than-expected pace at 0.2% in Jan, against consensus 0.1%. Aside, University of Michigan Sentiment Index showed a lower reading of 90.7 for the month of Feb, from 92.0 recorded earlier.
• USD pared losses, on the back of positive reading from US retail sales. JPY weakened from recent bullish trend, dragged down by improved risk sentiment following the gains in stock markets and crude oil. USD/JPY rebounded from the recent lows below 112.00, and climbed to close at 113.25.
• Ringgit govvies moved in mixed directions, but were generally well supported on Friday. Flows were heavy, and slanted toward short and medium term papers, particularly MGS Sep’25. Meantime, the new 7-year MGS auction was announced with a size of RM4 billion. WI was last heard at 3.84/81%. Tender closes Tuesday 16 Feb.
• Thai credits strengthened a tad, with gains concentrated on the front end of the curve. Notably, longer dated THAI254A was traded 51bps lower to 4.39%.
• Indonesian government bond market opened lower 25-50c in price following Thursday's profit taking action. However, buyers emerged and keep market well bid. We have seen mixed flows in a choppy market, a bit volatile with yield movement up and down 5-8 bps on average. This week there will be some important catalysts locally, mainly the BI rate decision on Thursday (where Bloomberg survey expects BI rate to be cut by 25bps to 7%), trade balance data and bond auction. Volume increased to IDR13.5 trillion.