CIMB Daily Fixed Income Commentary - 24 Feb 2016

Market Roundup

• US Treasuries closed firmer, alongside the declines in crude oil price and stock markets. Brent crude oil dropped from $34.69/bbl to $33.27/bbl after Saudi oil minister Ali al-Naimi said major oil producers denied there has been a deal for production cuts.
• USD/JPY hit a fresh low at 111.76 this morning, amid risk-off sentiment on the back of overnight fall in crude oil prices and stock markets. GBP/USD trended lower to test the support level of 1.4000 amid fear of Brexit. Aside, EUR/USD closed above 1.1000, after retreating from the peak of 1.1363 earlier this month. We see more downside risk, heading into March ECB meeting, with speculation of further easing.
• Ringgit sovereign bonds closed slightly weaker due to profit taking activities, in conjunction with weaker MYR. USD/MYR closed at 4.2002 on Tuesday.
• The new 5-year GII auction was announced with a size of RM3.5 billion, slightly lower than our expectation of RM4.0 billion. WI level was last heard at 3.76/71%, drifting from 3.80/72% indicated earlier.
• Aside, Fitch has affirmed Malaysia’s long-term foreign and local currency ratings at A- and A respectively with Stable outlook.
• Thai government bonds closed mixed amid a lack of fresh catalysts. However, foreign players resumed net selling activity after market reopened on Tuesday, recording a total net selling amount of Bt7 billion. Meanwhile, the IRS curve ended steeper, with the rates moved higher by up to 4bps at the long end. Upcoming focus will be on the trade numbers slated for this Friday.
• The Indonesian government bond market opened on biddish tone Tuesday amid the stronger Rupiah. Local players were seen with buying interest on 2- to 3-year buckets especially on SR07 and ORI12 series, and also on longer dated 20-year bonds. However nearing closing hour, market traded down 25 cents in price term, on bellies to long end of the curve. We see shortening duration is still in play. MoF held IDR syariah bond auction and issued IDR1.075 trillion, higher than their IDR4 trillion target after received IDR9.85 trillion incoming bids. MoF issued heavily on the 6-month SPNS bill and 2-year PBS9 bond (total of 89% from auction issuance). Volume dropped to IDR6.7 trillion.