Friday, February 10, 2017

US Treasuries underwent a sell-off thus wiping out the prior day’s gains as President Trump announced his tax plan will be announced in 2-3 weeks. In macro data release, initial jobless claims fell to 234k in the week ended 4 Feb from 246k the week before or the lowest since last Nov.

Market Roundup
  • US Treasuries underwent a sell-off thus wiping out the prior day’s gains as President Trump announced his tax plan will be announced in 2-3 weeks. In macro data release, initial jobless claims fell to 234k in the week ended 4 Feb from 246k the week before or the lowest since last Nov.
  • MYR will open weaker today seeing USD gaining sharply overnight against JPY. Again the markets are moving on events and comments. Events and President Trump comments are somewhat beyond the realm of prediction. FOMC members, especially the voting ones, are largely sticking to the gradual language which would keep the upside of the USD limited for the time being. If they were to change their language to more aggressive, the policy divergence trade will return to boost USD. Barring that, the USD downward trend will continue. Elsewhere, IDR bucked trend of regional fx down against a firmer USD, as Moody’s upgrades Indonesia’s rating outlook to Negative.
  • Ringgit govvies were traded on weaker tone, in conjunction with higher USD/MYR ahead of Thaipusam holiday on Thursday. Furthermore, we suspect selling pressure was also due to investors making room for the upcoming auction (new 7-year GII). Pending announcement, we expect issue size to come at RM4.0 billion. On the other hand, foreign players continued to trim Ringgit government fixed income securities for the third consecutive month. Total foreign holdings edged lower from 32.1% in Dec 2016 to 31.2% in Jan 2017, which is equivalent to RM3.09 billion.
  • Thai govvies curve shifted lower by 1-3 bps along the belly (2-10-year tenors) tracking gain in US Treasuries. Demand was seen on 10-year LB26DA from local asset managears and banks but there was some profit taking pressure concentrated around LB206A and LB226A. Foreign players continued to register as net buyers in Thai govvies at THB2.08 billion Thursday. The 5-year THB IRS rate declined with the mid rate last seen about 2.14% and we believe that hedging interests for paying fixed on dips may cushion below this level. The auction of Bt12 billion 50-year LB666A on Wednesday drew market attention especially from insurance companies at 1.46 bid-cover, the highest since Sep 2016 and average bidding yield increased to 3.699%.
  • IDR market rallied on the back of positive sentiment on Thursday after Moody’s revised Indonesia debt rating outlook to Positive from Stable. Offers have been taken in the early trading session across the tenors.  The net buying interests continued in the second session from both local and foreign names, to follow the USD/IDR strength. USD/IDR currency traded below 13300 on Thursday. Interestingly a few small local banks that we have never seen in the market, took a part of this rally. Market volume decreased to IDR14.3 trillion and was evenly shared between different maturities.
  • Secondary trading in the Asian dollar credit market saw demand coming in for Indonesian sovereign papers, as the country received a boost from Moody’s upgrading its rating outlook from Stable to Positive. Indonesia’s 47s which came out at reoffer of 99.246 in Dec was heard near 106.125 bid-side.

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