Thursday, February 16, 2017

US Treasuries extended losses on Wednesday in conjunction with positive economic data releases whilst DJIA hit fresh high and closed at 20611. In economic data releases, Jan CPI grew by 0.6% mom, way above +0.3% forecasted earlier. Retail s

Market Roundup
  • US Treasuries extended losses on Wednesday in conjunction with positive economic data releases whilst DJIA hit fresh high and closed at 20611. In economic data releases, Jan CPI grew by 0.6% mom, way above +0.3% forecasted earlier. Retail sales expanded by 0.4% mom in Jan, higher than 0.1% anticipated gain. However, industrial production contracted by 0.3% mom during the same period, weaker than consensus 0% and Dec +0.6%.
  • During the second day of her congressional testimony, Fed Chair Janet Yellen admitted that economic growth is ‘quite disappointing’, but has recovered in a faster pace than EU post crisis. However, she stated that the Fed is very close in reaching to both of its employment and inflation targets.
  • Ringgit govvies closed mixed, whilst IRS curve inched up by 1-2bps, as sentiment was slightly dampened by hawkish comments made by Fed chair Janet Yellen a day before. Trading activities were also lighter, totaling RM2.4 billion, way lower than RM4.3 billion garnered in previous day. Key data to watch out will be the 4Q2016 GDP report slated for Thursday.
  • Thai bonds did not react to higher Treasury yield after hawkish Yellen’s statement. Govvies were traded higher in a bull-flattening move as yields along the long-end edged lower about 2bps and the auction of 15-year LB316A drew solid demand mainly from insurance companies at 3.86 bid-to-coverage ratio and average bidding yield at 3.246%,  (lower than our expectation of 3.40% and previous close of 3.80%).  In sum, 15-year sovereign yields fell by 7bps to end at 3.22% on Wednesday and current price level indicated limited upside basing on our observation of market demand.

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