CIMB Daily Fixed Income Commentary - 15 Jun 2016

Market Roundup

• Risk-off sentiment driven by major central bank meetings and Brexit Referendum continued to weigh US Treasury yields lower in the earlier session, with 10T yield dipped to the fresh low at 1.57%. However, gains were eventually reversed amid profit taking activities. On the other hand, German bund yield curve ended lower and flatter, with 10-year benchmark yield dipped into the negative territory at -0.004%.
• Markets were preoccupied with what to expect from upcoming major risk events, namely FOMC (and BoE and BoJ) policy meetings and Brexit vote later this month. These led to controlled movement in local currency govvies markets Tuesday. MYR government bonds ended within a tight range whilst MYR itself moved higher around 4.1100 since a day prior.
• THB government bonds were dealt weaker, but losses were pretty mild and we think mostly due to profit taking activity after the recent hard rally (post release of weak May US jobs report). The 3- and 5-year govvies were about 1-3bps higher for the day. THB was steady hovering around 35.186 Tuesday versus 35.193 the day before. Losses also came ahead of scheduled bond auctions Wednesday – sale of LB206A worth Bt20 bilion and LB366A Bt10 billion.
• Indonesian government bond market traded in tight range for most of the day, however near closing hour foreign onshore banks tried to sell 5-, 10- and 15-year benchmark bonds. Market well supported with bidders emerged and kept bidding at current level. On Tuesday’s IDR Syariah bond auction, government received IDR6.9 trillion of incoming bids, and decided to upsize the issuance to IDR5.075 trillion from initial target of IDR4 trillion. 49% of the incoming bids went to 2-year PBs9 (IDR3.4 trillion, bid-to-cover: 1.15x). Market volume increased to IDR11.6 trillion and was dominated by bonds maturing in over 10 years (50%) and bonds maturing between 1 and 5 years (28%).