CIMB Daily Fixed Income Commentary - 14 Jun 2016

Market Roundup

• Ahead of FOMC, BoE and BoJ meetings and amid rising speculation the UK will vote to leave the European Union, US Treasuries posted further gains on safe haven demand. As UST yields fell 2-4bps for the day, UK gilts saw yields down by similar measure with the 2-year down 1bps to 0.38% and the 5-year down 3bps to 0.73% even as the BoE is not expected to cut its policy rate at this week’s policy meeting (policy rate now at 0.50%).
• According betting agency Ladbrokes, the UK has 64% chance to remain in the EU whilst an FT poll indicates a lower 45% chance the UK will stay. The UK’s EU referendum is slated for 23 Jun and the BoE policy meeting is 16 Jun.
• Ringgit government bonds were dealt mixed. Sentiment was affected by regional stock market losses as well as crude oil price and Ringgit levels weakening. However, safer haven government bonds proved relatively resilient at end of day. Expectation the Fed will not hike rates yet also supported Ringgit govvies. USD/MYR was around 4.0953 mid-afternoon Monday as Brent crude slipped below $50 per barrel.
• Baht denominated government securities also moved little on Monday with the Baht managing to sustain above 35.15 most of the day.
• IDR government bond market opened around 25c lower in price amid risk factors including Brexit. From there, bonds were traded in a tight range until the end of day on thin volume. We expect today's Syariah bond auction to see good demand, especially short dated bonds. MoF has targeted to issue IDR4 trillion on auction day. Volume improved to IDR8 trillion and dominated by bonds maturing in over 10 years (59%) and bonds maturing between 5 and 10 years (29%).