Friday, February 3, 2017

US Treasuries rallied in the morning session Thursday before paring gains to end the day little changed. Ahead of a batch of macroeconomic data due Friday including Jan non-farm payrolls and non-manufacturing ISM, Treasuries had been bo

Market Roundup
  • US Treasuries rallied in the morning session Thursday before paring gains to end the day little changed. Ahead of a batch of macroeconomic data due Friday including Jan non-farm payrolls and non-manufacturing ISM, Treasuries had been boosted by recent FOMC comments which did not sound as hawkish as expected. However, players turned cautious ahead of Friday’s data, and Thursday’s data release included unit labor costs for 4Q2016 which was just slightly lower than expected at +1.7% (consensus +1.9%). Consensus expectation for Jan NFP is +180k or higher than +156k in Dec whilst non-manufacturing ISM is an increase to 57.0 in Jan from 56.6 Dec.
  • GBP remained weak even though BoE revised upward its 2017 growth forecast to 2.0%, or at a much stronger pace than its earlier forecast (done in Nov 2016) of 1.4%. But there is little expectation the central bank is in a hurry to hike rates, thus limiting the cable upside. BoE kept its policy interest rate at 0.25% as expected and maintained its asset purchases program.
  • MYR government bonds reopened after a short mid-week break on a mixed note. Some gains were pared down ahead of the close. Benchmark papers moved sideways though there were hints of offshore demand intraday.
  • In the Thai government bond market, papers with tenor 10 years and shorter edged lower about 2bps across the curve with active buyers concentrated around LB19 to LB21. Bonds gained after outcome of the FOMC meeting on Feb 1 - which lacked a hawkish surprise and buoyed anticipation of gradual tightening path by the Fed. Foreign investors continued to accumulate Thai bonds at Bt3.23 billion amid the stronger Baht with increased appetite for the short-end. However, at the same time, we saw some profit taking pressures on LB206A and LB226A.
  • IDR government bonds were traded up post-FOMC but mostly in a tight range for the except just before closing hour when some net buying activities were done on 5- and 10-year benchmark series. Volume was steady amounting to IDR11.8 trillion, dominated by bonds maturing in over 10 years (53%).

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