Friday, March 17, 2017

US Treasuries weakened which looked mainly due to profit taking activities after markets read

Market Roundup
  • US Treasuries weakened which looked mainly due to profit taking activities after markets read expectation the Fed is in no rush to tighten monetary policy so soon after this week’s rate hike. There was little else to move the market, except for some macro data and players watching other central banks (BoJ, BoE and PBOC). BoE policy meeting was more looked at with policymakers sounding a tad hawkish, which resulted in sell-down in gilts.
  • USD weakened still, down versus GBP especially. DXY down to about 100.61 overnight. GBP rose as BoE did not move on monetary policy though policymakers did sound hawkish which saw weakness in gilts. Policymakers voted 8-1 to hold the interest rate at 0.25% and maintain their asset purchases program at GBP435 billion, especially with short to medium term risks such as Brexit and BoE member Kristin Forbes (who was the sole dissenter in the vote) will be leaving the central bank mid-year. GBP/USD now around 1.2354.
  • After the hike and indications Fed is in no hurry to tighten policy at faster-than-expected pace, USD weakened and resulted in firmer MYR and shift lower in MYR IRS curve. MGS also strengthened, right of the bat at Thursday’s open, and slanted towards select benchmarks (with new 5-year MGS seen down 5bps in the morning session).
  • FOMC outcome sparked gains in Thai govvies securities with the curve flattening down 3-6bps along the intermediates. Heavier trade was seen on 5-year LB226A and 10-year LB26DA and the bonds outperformed with yields down 4-6bps. Foreign players also increased position, in longer than 1-year bonds at Bt1.02billion while dampened short-end bonds at Bt50million after the Fed raised interest rate by 25bps and signaled gradual hike approach. In the swap market, 3-year IRS corrected lower after gliding to 1.95% high ahead of FOMC and we target this level as  key resistance.
  • IndoGB rallied post-FOMC by 10-25bps, buyers seen all across the curve. The market retreated in the afternoon when profit taking activities came in. The yield curve 6-15bps lower compared to previous day’s closing.

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