CIMB Daily Fixed Income Commentary - 19 Apr 2016

Market Roundup

• US Treasury yields were weighed as crude oil prices fell in the early session but yields subsequently rose to close higher in conjunction with the recovery in crude oil prices. Brent crude staged a good recovery from the intraday-low of $40.22/bbl and closed at $42.91/bbl.
• In the near term, we expect sustained support for Treasuries though pace of price appreciation will be limited as we head closer to the 27 Apr FOMC meeting and blackout period on policy makers leading up to it. At this juncture, we see support for the 10T at 1.66%, and then towards 1.60%.
• Ringgit sovereign bonds were thinly traded and moved in narrow range on Monday. We noted net selling interest, as sentiment was weighed by weaker crude oil prices and Ringgit, following the disappointing outcome at the Doha oil producers’ meeting.
• Aside, investors continued to acquire assets into their portfolios, sending MYR corporate bond yields lower, particularly along the bellies of the AAA and AA space. We think the AAA curve appears to be tight at this juncture, due to recent heavy demand, while we prefer selective AA papers for better pickup. However, we do not see potential of large sell-off in the near term period, as primary pipelines remain thin.
• Thai govvies posted gains after the market reopened after the long weekend. Sentiment was aided by the decline in crude oil prices, after the disappointing Doha oil producers meeting. On the flipside, IRS rates moved in mixed direction with the 7- and 10-year tenors notably fell by 9-10bps. Upcoming highlight will be on LB25DA auction slated for 20 Apr, which is indicated with an issuance size of Bt16 billion.
• It was a quiet day for Indonesian bonds, with net selling pressure seen in FR56 and FR73.  However, support was seen in non-benchmark papers particularly 6-11 year bonds from local names, amid a lack of supply with those tenors. We think the market will remain resilient, possibly further strengthening, as Indonesia’s sovereign rating may be potentially by upgraded by S&P in May. Elsewhere, volume fell to IDR7 trillion, whilst most heavily traded papers were those with 10 years or longer maturity (44%) and 1-5 years (23%).