Friday, August 5, 2016

US Treasuries further strengthened, in conjunction with rally in UK Gilts, following the BoE’s

Market Roundup
  • US Treasuries further strengthened, in conjunction with rally in UK Gilts, following the BoE’s rate cut decision. The 10-year UK Gilt saw its yield dropped from 0.80% to 0.64% on Thursday. The UK central bank slashed its policy rate from 0.50% to 0.25%, whilst increasing its exiting QE programme from £375 billion to £435 billion. On top of that, it will also expand to corporate bond purchases worth up to £10 billion, and provide new funding as much as £100 billion to banks for lending.
  • Malaysian sovereign bonds extended losses, amid guarded sentiment ahead of Friday’s US NFP data release. Meantime, the RM3 billion 7-year reopening auction ended with weak demand, indicated by a low bid-cover of 1.577 times. Aside, average yield stopped at 3.483%, within a spread of 3.464-3.498%, and was higher than WI level of 3.465/455% a day prior the tender close.
  • Thai government bonds posted little gains on Thursday. Daily volume was heavier at Bt22.6 billion, in contrast to Bt12.9 billion a day prior, with activities led by medium dated papers namely LB21DA and LB226A.
  • Indonesian govvies were mostly traded in ranges throughout the day, whilst volume was thin as market digested the revised 2016 budget deficit target, which increased from 2.35% to 2.5%. Budget revised again as the new Finance Minister estimates tax revenue shortfall will be IDR219 trillion due to falling commodity and energy prices, and as a consequence government will need to cut spending further and issue another IDR17 trillion worth of bonds to manage the deficit. However market may see this as long-term positive, as government finally realized the ambitious tax revenue target may not be achieved by year-end, and thus act accordingly before it's too late. Near to closing hours, market was more active, with investors looking to bid on short end to belly. Market volume fell to IDR11.7 trillion and was dominated by bonds maturing in over 10 years (85%).

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