- US Treasury yields hovered near prior levels, as investors awaited BoJ meeting outcome on Friday. Elsewhere, US macro data were weak ahead of Friday’s release of 1Q2016 GDP, including initial jobless claims which rose to 266k as at 23 Jul, from 252k recorded a week ago, whilst US goods trade balance narrowed to a deficit of $63.3 billion in Jun from -$61.1 billion in May.
- Following poor auction results from 2T and 5T conducted earlier this week, the $28 billion 7T auction was well received with a bid-cover of 2.51 times, similar to the past twelve months’ average. High yield stopped at 1.34%, whilst indirect bidders took 65.5% of the sales.
- USD continued to show weakness against major rivals. EUR/USD peaked at 1.1119, but was eventually pared lower and closed at 1.1077. Still see upward bias, with immediate resistance at 1.1150. On the flipside, USD/JPY remained range trading, amid speculation of further easing measure to be conducted by BoJ.
- USD/MYR dipped and tested the support of 4.0500 on Thursday. Topside remains at 4.1500 at this juncture, given the broadly weaker USD post FOMC. However, downside may be limited in the short term amid declining crude oil prices.
- Ringgit denominated sovereign bonds posted mild gains on the back of improved sentiment in conjunction with firmer Ringgit post FOMC. Expect market to further strengthen if Ringgit and crude oil prices are able to stabilize.
- Thai govvies stood on stronger footing, tracking gains in overnight UST following the FOMC decision. Flows were relatively thin at Bt17.3 billion, led by LB21DA and LB206A, whilst lower than Bt30.1 billion garnered a day prior. We reckon that Thai govvies will see better support in the medium term period, as the Fed is expected to tighten at a gradual pace.
- Indonesian government bond market was relatively quiet ahead of BoJ meeting. Indo govvies were dealt on biddish tone with local players seemed to be on the paying side, and some buying action occurred on the shorter dated bonds with maturities of 2-3 years. Market volume fell to IDR11 trillion and was dominated by bonds maturing in over 10 years (69%).