US Treasuries continued to strengthen. Gains came on the back of lower ISM data, oil prices and ahead of more macro data and FOMC minutes this week. There were also safe haven flows following the Russian subway attack on Monday. Nevertheless, we see limited UST strength down to 2.30% at which mark we expect shorts to come

Market Roundup

• US Treasuries continued to strengthen. Gains came on the back of lower ISM data, oil prices and ahead of more macro data and FOMC minutes this week. There were also safe haven flows following the Russian subway attack on Monday. Nevertheless, we see limited UST strength down to 2.30% at which mark we expect shorts to come around.
• NFP for Mar is due Friday with consensus expectation showing a smaller rise of 175k against +235k in Feb. Yet, continued NFP expansion above historical moving averages should ensure limited upside to UST.
• On data front, ISM manufacturing was at reading of 57.2 for the month of Mar, in line with market expectation but lower than 57.7 registered in prior month.
• Malaysian sovereign bonds closed little changed, amid thinner flows, as daily volume dipped from RM3.1 billion registered last Friday to RM2.7 billion. Trading activities remained slanted towards shorter dated papers on Monday. On the opposite side of the spectrum, 10-year MGS resistance is around 4.21%, or just 3bps from last Thursday’s level. Next resistance is pretty high up around 4.28%, in our opinion. Longer term, target for 10-year MGS remains 4.25-4.50% end-2017 but this takes into account Fed hikes (target Fed funds rate at 1.25%). Hence, longer term we watch out for external risks and volatility signals, growth prospects and signs of demand-pull inflation.
• Thai bonds continued to rally on the first trading day in Apr after the Ministry of Commerce released the Mar inflation data - headline CPI grew by 0.76% yoy, the slowest pace in four months. The curve flattened further with 3-7bps decline mostly by aggressive bids from foreign buyers who increased significant positions in Thai bonds at Bt10.41 billion in short-term bond and Bt3.12 billion longer than 1-year bonds (after the BoT reduced short-term supply maturing from 90 days to 182 days in a bid to curb foreign fund inflows). Therefore, short-term LB especially at LB176A received positive spillover from dried up central bank bond supply and bidding yield recorded at low level of 1.40% from the opening level about 1.44%-1.45%.
• IndoGBs gradually traded up in a relatively quiet market. After Mar CPI data was released in the AM session, in which mom CPI was in negative territory (-0.02% actual, vs +0.20% forecasted and +0.23% prior month) and yoy CPI was lower (3.61% actual, vs 3.80% projected, and 3.83% prior month), more buyers were seen on 5- and 10-year benchmark series, and market traded in range afterwards at current level until close. Total volume improved slightly to IDR11.1 trillion and evenly distributed between 1- to 5-year, 5- to 10-year and above 10-year maturity bonds.