Tuesday, August 2, 2016

US Treasuries were traded on weaker tone on Monday, reversing gains registered last Friday

Market Roundup
  • US Treasuries were traded on weaker tone on Monday, reversing gains registered last Friday triggered by soft 2Q2016 GDP data. Meanwhile, buying interest in UST was dampened by cautious trading, despite the lower crude oil and stock prices.
  • FX market saw range trading, amid a lack of fresh catalyst at this juncture. EUR/USD consolidated near 1.1160, after the steep move from the lower range at 1.1000 last week. Similarly, USD/JPY saw better support at 102, after the plunge from 105-106 range last week. Further decline may see the currency pair testing the psychological level near 100.
  • Ringgit government bonds gained alongside steady MYR (amid weak USD) and higher crude oil price. USD/MYR was spotted near 4.0261 late Monday after closing at 4.0681 last Friday. USD had betrayed their bulls since last week, with FOMC not signalling a quick rate hike anytime soon and 2Q2016 disappointing. With USD under pressure, crude oil was firm with Brent around $42.86 per barrel late Monday. MYR IRS was 1-2bps lower. We expect support for 3-year MGS at 2.82% this week.
  • We see USD/MYR range of 4.0000-4.0800 this week unless US data this week largely disappoints.
  • MYR corporate bonds volume traded was just decent around RM180 million on Monday. We think interest was a tad subdued at start of the month. We expect bargain hunting to resume later this week, slanted towards shorter tenor bonds, seeing gains in shorter dated MGS Monday.
  • Thai government bonds were supported by offshore demand ahead of BoT meeting this week, with consensus showing interest rates will remain at present level. Foreign investors were net buyers of Bt22.5 billion of Thai bonds Monday.
  • Indonesian government bond market traded firmer again on the back of lower-than-expected July CPI data (YoY 3.21%, survey 3.37%, prior 3.45%). For Tuesday’s bond auction, government targeted to issue IDR12 trillion. We think that it will generate good demand, gauging by market activities on Monday. Trading volume decreased to IDR9.6 trillion and was dominated by bonds maturing in over 10 years (56%).

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