CIMB Daily Fixed Income Commentary - 03 May 2016

Market Roundup

• On Monday, US Treasury yields edged lower on the back of weaker oil prices and weak ISM manufacturing reading, but eventually moved and closed higher driven by gains in the stock market. The DJIA closed at 0.66% higher at 17,891 whilst short tenor UST rose 1-2bps and longer securities rose 4-5bps. The coming week we expect UST to be supported but prone to bouts of profit taking pressure ahead of the Apr NFP. The 10T support remains at 1.80%, followed by 1.75%. Consensus expectation for the non-farm payrolls is rise of 200k against +215k in Mar.
• Malaysian sovereign bond market consolidated with thinner flows of RM3.8 billion last Friday ahead of the long weekend, compared to RM5.1 billion a day prior. As we expect MGS yield movement to be rangebound this week, we continue to rely on receiving side in the swap market. We still see potential for 0-5bps decline in the 5-year IRS in the short term period.
• Thai government bonds were thinly traded, with daily volume totalling Bt10 billion registered ahead of the long weekend. This week we expect cautious trading ahead of MPC meeting. Resistance on the 10-year govvies remain 1.83%, a break above brings next resistance at 1.91% and 1.97%. In economic data release, the trade balance fell to $4,678 million in Mar from $5,978 million in Feb, mainly dragged by the surprise dip in exports of 1% (against consensus increase of 6.2%). Meantime, inflation was higher-than-expected at +0.07% for the month of Apr, against forecast -0.11%. We think this may increase the possibility for the BoT to maintain its policy stance unchanged in the upcoming 11 May MPC meeting and continues to await further development before opting for an easing move.
• Indonesian government bond market was very quiet on a shortened week as other regional countries were on holiday. Market was directionless for most of the day until S&P’s meeting with the government on next month outlook. Market strengthened with price rose by 25-50 cents on 10- and 15-year benchmark bonds. April CPI data also came out, down to -0.45% mom, lower than -0.28% expected. Volume was only IDR5.8 trillion and dominated by papers maturing in over 10 years (62%).