Monday, March 13, 2017

US Treasuries posted gains despite the stronger-than-expected Feb non-farm payrolls, mostly on suspected bargain-hunting interest after yields had surged in the past couple of weeks

Market Roundup
  • US Treasuries posted gains despite the stronger-than-expected Feb non-farm payrolls, mostly on suspected bargain-hunting interest after yields had surged in the past couple of weeks ahead of the mid-Mar FOMC meeting. On the other hand, sentiment was still shaky in bursts, amid speculation the ECB was eyeing a hike in deposit rates before ending its asset purchases program (though end of purchases may happen into the longer term horizon).
  • Along the MGS market, we suspect there was some foreign net selling on the front of the curve alongside domestic players providing offers ahead of NFP data release and FOMC meeting.
  • The coming week should see sustained cautious sentiment in bond markets, ahead of FOMC. However, even assuming a rate hike, we think markets will then show some strengthening post-FOMC, as a major hurdle is overcome whilst outlook for faster-than-expected rate hikes following this remains questionable. The major ingredient for accelerated US growth, being Trump’s fiscal plans, remains scant in details and markets have not gone ahead of itself pricing this in.
  • IndoGBs opened on offerish tone ahead of US NFP data release. However bonds held on and rebounded but were again offerish near closing time. Overall, the curve was about 1-2bps at the close.

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