Monday, February 27, 2017

US Treasuries remained firm post release of less-hawkish-than-expected FOMC minutes, though we suspect players turned more cautious along with the upward trending stock prices, awaiting President Trump’s tax plan announcemen

Market Roundup
  • US Treasuries remained firm post release of less-hawkish-than-expected FOMC minutes, though we suspect players turned more cautious along with the upward trending stock prices, awaiting President Trump’s tax plan announcement and the Treasury secretary dampening hopes fiscal plans will have large impact on growth this year. DJIA recorded fresh high at 20821 on Friday. Markets will be watching various Fed members giving speeches this week. Apart from that, key releases include durable goods, 4Q2016 GDP, PCE Price, and Fed Beige Book.
  • Ringgit government bonds closed on weaker footing ahead of the weekend. As for this week’s 30-year MGS reopening, WI is heard around 4.70/65% tighter than 4.72/61% quoted last Friday. We expect cautious trading ahead of MPC meeting scheduled for 2 Mar, with consensus expectations the central bank will maintain the policy rate at 3.00%. Apart from that, players will be eyeing the latest trade numbers. Consensus expectations are that exports and imports will grow at 14.8% and 12.0% yoy respectively in Jan.
  • Thai bond curve was in bull-flattening shape as 5-year tenors and over declined 2-4bps following the rally in UST after Treasury Secretary Mnuchin expressed fiscal stimulus will have limited impact this year. Therefore, US yield and stock were under downward pressure amid fading reflation trades from lower hope on fiscal stimulus. Local player's interest leaned towards intermediates, namely LB21DA and LB226A and foreign players’ interest concentrated around LB316A (4bps lower). Foreign investors were net buyers of Thai bonds at Bt1.62 billion on Friday as they bought Thai bonds maturing over 1-year at Bt1.64 billion.
  • IndoGB yield curve fell Friday in line with regional bond movements. The market looked active along the 7-10 year space, driven by flows and short covering activities. If the momentum continues, this Tuesday's bond auction should invite bidders. Volume was steady amounting IDR12.7 trillion and dominated by bonds maturing in over 10 years (40%).

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