- US Treasury yields dipped across the curve, weighed by weaker-than-expected core inflation and retail sales numbers released on Friday. Core CPI increased marginally by 0.1% mom in Apr, against consensus 0.2%, while retail sales expanded by 0.4% mom during the same period, lower than 0.6% expected. However, University of Michigan consumer confidence index rose to 97.7 reading in May from 97.0 Apr.
- We had a Fed Speaker out on Friday and the message had a dovish tint. Chicago Fed president Evans said that he would be surprised should the Fed raise rates more than twice this year. He added that it could just be one more hike should the inflation outlook becomes cloudy. Elsewhere, Philadelphia Fed president Harker sees two more rate hikes will be appropriate this year, amid very little slack in the job market
- Ringgit govvies hovered near prior levels, with flows slanted towards the 5-year MGS and GII benchmarks. Meantime, WI for the 10-year MGS was tighter around 3.98/93% on Friday.
- Bank Negara Malaysia held the policy interest rate at 3.00% as widely expected. Policymakers also maintained their neutral tone, though they sounded slightly more upbeat on growth compared with their statement from the Mar 2017 policy meeting. They indicated growth remains driven by both domestic and external demand. Furthermore, the central bank said the recent high inflation is merely cost driven and that price pressures will moderate in the second half of the year. Upcoming data releases will be Apr inflation (consensus +4.6% yoy) and 1Q2017 GDP (consensus +4.6% yoy).
- Thai bond curve continued to maintain dynamic trade based on expectation of upcoming bond switching program. That said, shorter tenor levels stayed flat and longer dated papers saw felt upward yield pressure especially on LB25DA, LB267A, and LB296A. Overall market activities remained quiet as players look for fresh catalysts. Thailand's GDP growth in 1Q17 will be released on Monday at 9.30 local time and we expect growth will stay moderate or not far from +3.0% yo. Positive but not overly optimistic growth will shore up economic sentiment and further increase upside risk to long-term yield before the auction of LB316A .
- Indonesia government yield curve bull flattened on the back of offshore interest. Market was biddish since opening, with buyers showing bids in 10-20 year space, while both locals and foreigners showed selling pressure along 2-4 year space. As expected and mentioned on our commentary on last working day's closing (Wednesday) that market remains resilient and bidders would appear after Vesak holiday.