Tuesday, April 18, 2017

US Treasuries weakened a tad, reacting to gains in stock market, as geopolitical tension eased with no further military actions by both US and North Ko

Market Roundup
  • US Treasuries weakened a tad, reacting to gains in stock market, as geopolitical tension eased with no further military actions by both US and North Korea. This followed from North Korea’s missile test launched during the weekend. Macro data was weaker than expected but the ease in geopolitics ended up swaying UST sentiment by the close. DJIA closed 183 points higher at 20636 post Easter weekend. The Empire manufacturing recorded at 5.2 for the month of Apr, weaker than 15.0 forecasted earlier.
  • Indeed, there should have been a bigger reaction to the Treasury Secretary remarks that the Trump administration is unlikely to meet its Aug deadline for enacting tax reforms. We have yet to even have a concrete proposal not to mention a possible government shutdown at the end of the month and also budget negotiations for the coming year. Mnuchin said that the failure to repeal Obamacare has thrown off the aggressive timeline for legislative action.
  • Malaysian sovereign bonds closed slightly firmer Monday. Trading flows remained thin as there was little fresh guidance with several markets on Easter holidays. As for economic data, market will be eyeing on Mar CPI slated for 19 Apr, where consensus expects +5.2% yoy growth.
  • Demand for Thai bond strengthened after the market reopened from the holiday as dovish Trump and geopolitical tension around the US, Syria, Afghanistan, and North Korea bolstered demand for safer bond. Thai govvies yields declined along the curve and bond maturing 6-15 years saw a strong demand with yields down 3-6bps. As LB yield slipped with the UST market, some local clients and offshore investors took profit. Foreign investors booked profit on longer than 1-year bonds about Bt1.35 billion while they bought short-term bonds at Bt769 million.  Meanwhile, local banks stayed biddish in long-term bonds especially at equal to and longer than 10 years.
  • Indonesian government bond market was very quiet on Monday after the Easter weekend, only some small activities seen in benchmark series, while other series looked muted. MoF will be holding a Syariah bond auction today. We think demand will be moderate for the sukuk and bids will be coming mostly from local names. Volume fell to IDR7.8 trillion.

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