CIMB Daily Fixed Income Commentary - 17 Mar 2016

Market Roundup

• US Treasury yield curve ended lower and steeper, as yields fell sharply along the front of the curve after the Fed decided to keep rates unchanged as widely expected and left space to allow inflation to increase. The 10T yield slipped from its intraday-high near 2.00% to close at 1.91% (-8bps).
• Policymakers revealed that economic activity has been expanding moderately despite higher risks seen in the global economy and volatile financial markets in recent months. On the positive side, the labor market continued to strengthen. While inflation has picked up, it remains below the 2% longer-run objective, dragged by lower prices in energy and non-energy imports. Likewise, the Fed slashed its 2016 growth forecast from 2.4% to 2.2%, whilst lowered its FFR projection, signaling another 50bps hike, instead of 100bps hike it had expected earlier this year.
• DXY index dived from an intraday-high near 97.00 to close at 95.89, reacting to the dovish FOMC outcome. USD/JPY rebounded a tad after breaking the support at 112.50. Meanwhile, EUR/USD surged and surpassed 1.1200 on Wednesday.
• Ringgit govvies moved in mixed direction amid thin flows on Wednesday. Daily volume was muted at RM1.6 billion. On the flipside, IRS rates inched higher by 1-2bps across the curve.
• Thai sovereign yield curve ended lower and steeper during mid-week, with gains slanting toward the front end of the curve. On the flipside, foreign players turned net sellers with total net selling amount of Bt765 million.
• The Bt10 billion LB296A auction garnered a decent bid-cover of 2.53 times. Average yield stopped at 2.0213%, with high – 2.0300% and low – 1.9940%.
• In general, Indonesian government bond market was quiet ahead of the FOMC meeting and BI rate decision. Market was seen in better selling mode, in line with weaker Rupiah, sending yields up 2-3 bps across the curve. Volume jumped to IDR20.4 trillion.