US Treasuries weakened alongside losses in Euro Zone sovereign debt space with bunds up about 8bps. On top of continued pricing of a Dec FOMC rate hike, sentiment in bond markets were upended with a positive number in UK’s 3Q2016 GDP (up 0.5% qoq). In Asia, BoJ’s Kuroda on Thursday reiterated the central bank

Market Roundup

• US Treasuries weakened alongside losses in Euro Zone sovereign debt space with bunds up about 8bps. On top of continued pricing of a Dec FOMC rate hike, sentiment in bond markets were upended with a positive number in UK’s 3Q2016 GDP (up 0.5% qoq). In Asia, BoJ’s Kuroda on Thursday reiterated the central bank’s intention for a steeper bond yield curve, as both the European and Japan monetary authorities appear to be baulking to continue deep monetary stimulus next year.
• US dollar strength continued with the DXY up 0.32% to a reading of 98.94 amid persistent expectation of a Dec FOMC rate hike. Most under pressure against USD was JPY with fears of outflow from Japan seeing higher yields offered in US and in Europe. Fresh doubts over BoJ’s continued stimulus program continuing into next year was counterbalanced by anticipation of a Fed interest rate hike and ECB’s apparent hesitation for a steady extension of its QE asset purchases program after first quarter of 2017. Meantime, with USD strength, a rally in GBP on the back of the rosier than expected UK 3Q2016 GDP number was pared down. GBP/USD was 1.2167 this morning.
• Traded volume along the ringgit government bonds market was pretty light Thursday amid a lack of fresh market drivers. However, most of what were traded showed gains. IRS levels were a tad higher, but we think players in the bonds and swaps market remained wary of potential central bank rate cut come the Nov MPC meeting. The 3-year MGS remains below the OPR level (lower by 5bps).
• Tender for reopening of existing 20-year MGS (MGS May’35) closes Friday. WI for the RM2.0 billion new supply was heard at 4.28/20% Thursday and 4.27/22% this morning.
• Thai government bonds weakened following an upward pressure on onshore IRS (5-year IRS wider about 4bps Thursday) and weaker THB due to the USD strength. USD/THB was about 35.090 late Thursday versus 34.98 the day prior.
• There was a lack of fresh economic data Thursday but the BoT reported that gross non-performing loans rose to Bt393.6 billion or 2.89% of total loans end-Sep from Bt373.7 billion end-Jun.
• IDR government bonds were traded weaker Thursday as IDR currency was depressed weaker due to USD strength. Also, as it was near the end-month, players were heard preferring to lighten trading interest. Short to medium tenor govvies rose 2-4bps for the day. Market volume increased to IDR14.4 trillion, dominated by bonds maturing in over 10 years (55% of flows).