- US Treasuries rallied on safe haven demand as political uncertainties heightened from Trump’s dismissal of Comey and Comey’s assertion the president pressured him to stop investigation into former national security advisor Flynn. Current politics-related issues, which could indirectly influence Trump’s fiscal plans, has further shortened inflationary expectations - 2x10T spread slipping below 100bps (or tightest since the Nov 2016 election) and US 10-year breakeven rate down to 1.81% (also lowest since Nov).
- Malaysia: MYR sovereign bonds saw mild profit taking pressures and IRS rates ticked up 1-2bps. Malaysia’s CPI grew by 4.4% yoy in Apr, lower than consensus +4.5% and March +5.1% yoy respectively. Our forecast for headline inflation is unchanged at 3.5% in 2017 as we expect the pullback in fuel inflation to be the overarching driver of price trends in 2H2017. Thus, we expect Bank Negara Malaysia to hold the OPR at 3.00% in 2017. The risks to our inflation outlook are resurgent commodity prices, renewed weakness in Ringgit, and administered price increases (such as sugar and toll rates).
- Thailand: Demand for LB316A remained solid as the auction drew market attention at 1.63 bid-to-cover and had a lower average bidding yield of 3.1286% (2bps lower than closing price on Tuesday). Gain on this 15-year bond sale also built demand for the bellies, yield ending down about 2bps within 5-5 year segments. We view Thai market tested water with this bond sale and the result of the test indicates ongoing demand from local and offshore players. Therefore, LB316A may continue to add value to investors and the historical price in 2017 showed 3.269% high, 2.99% low, 3.147% average.
- Indonesia: Indonesia government bond market was traded in a tight range to open the morning session. However, market felt offerish in line with risk-off mode in FX markets. Despite some selling action afterwards, market was still supportive with bidders ready to buy on weakness. BI will hold its monthly meeting today, but market consensus sees 7-day reverse repo rate to remain unchanged at 4.75%.