CIMB Daily Fixed Income Commentary - 30 Mar 2016

Market Roundup

• US Treasuries reversed recent losses after Fed chair Janet Yellen indicated the Fed will take a cautious approach before again lifting interest rates. On the balance, Yellen allayed fears of sustained inflation outlook and at the same time said impact from market turmoil may be limited.
• We await this week’s important Mar non-farm payrolls data. Last week, the 4Q2015 GDP was revised upward to +1.4% versus the advance estimate of 0.7% and the second estimate of 1.0%. Major driver for the upward revision in 4Q2015 GDP was personal consumption expenditure (PCE) – this was revised upward to +2.4% against +2.0% prior estimate. Consensus forecast for Mar NFP is +208k but lower versus +242k in Feb.
• The US Dollar weakened, and US Treasury yields fell, impacted by Janet Yellen’s comments which indicated the next interest rate hike may not come earlier than expected. Versus the Euro, the US currency is near 112.50 against 113.65 the day before.
• The Ringgit proved resilient, and may show further strength today as the Dollar weaken, moving below the 4.0000 level, as crude oil price also showed strength. USD/MYR was at 3.9695 this morning versus 3.9976 the day before whilst USD/SGD is at 1.3549 versus 1.3677.
• Ringgit bond market moved sideways on thin flows in view of a lack of fresh market drivers. Elsewhere, the market faces Wednesday’s RM2.5 billion auction of the 15-year MGS. WI was last seen at 4.30/20%.
• Thai govvies closed within a tight range, as we think players turned cautious after the profit taking activity post MPC meeting. Most benchmark papers closed unchanged on a daily basis. Meanwhile, swap rates fell just a tad.
• IDR government bonds were traded down on the back of weaker Rupiah currency. The market was a bit quiet on auction day, and participation at the bond auction was also lower compared to prior auctions, with incoming bid only reaching IDR16 trillion (last auction IDR22 trillion). MoF targeted to issue IDR12 trillion in this auction. However, they downsized the issuance to IDR10 trillion and the market was well supported post-auction. Market volume increased to IDR13.7 trillion.