Wednesday, July 12, 2017

Thailand: Thai GB curve bear-steepened as expected after the market returned to trade on Tuesday with the strong reading of headline US NFP in Jun. The yields for tenors longer than 8 years inched 2bps higher while LB316A and LB296

Market Roundup
  • US Treasury yields were initially a tad higher than previous day closing. However, there was knee-jerk risk off reaction in capital markets following the emails released by Donald Trump Jr, in which involved him and others close to President Trump meeting with a Russian lawyer. Despite DJIA recovering in the later session, UST yields inched lower across the curve on Tuesday.
  • Yellen in the dock today and will command the market’s attention. Considering her previous performances it’s easy to expect that she would stick close to the script of gradual rate increases with balance sheet run off in the near future. As such market reaction could well be muted unless someone picks on certain words and make it out to be more than what it is. As it stands central banks remain on course to tighten monetary policy on both sides of the Atlantic and will exert pressure on EM fx.
  • Malaysia: Malaysian sovereign bonds closed a tad firmer, tracking the overnight gains in UST and bunds. Flows were thin and slanted towards shorter dated papers ahead of MPC meeting including MGS Feb’18, Sep’18 and Aug’23. Meantime, there was little catalyst to drive the market, as USD/MYR remained flat in between 4.29-4.30.
  • Thailand: Thai GB curve bear-steepened as expected after the market returned to trade on Tuesday with the strong reading of headline US NFP in Jun. The yields for tenors longer than 8 years inched 2bps higher while LB316A and LB296A rose at a greater extent about 5bps due to new supply of LB316A on Wednesday. In addition, foreign appetite for long-term bonds somewhat decreased after major central banks tilted toward less dovish policy outlook. Consequently, oversea investors have decreased positions in long-term bonds since 5 Jul and they sold longer than 1-year bond at Bt1.887 billion on 11 Jul. however, based on our observed market demand for the auction of LB316A on 12 Jul, we expect the amount of Bt14 billion will be well-absorbed as some players feel the yield at 3.00% and higher is an attractive buy level. Therefore, we project upside of the high yield of the auction result will be capped at 3.03%.
  • Indonesia: IndoGB rebounded on auction day. Market opened steady and bid-offer looked balanced prior to auction, where the government planned to issue IDR15 trillion. The government received a solid amount of incoming bids at IDR33.7 trillion. After result announcement, market rallied especially on auctioned bonds 10- and 20-year benchmarks, as bid-to-cover ratio for 10-year FR59 and 20-year FR72 were 2.88 and 1.87 respectively, caused market players to chase auctioned bonds in secondary market. Market volume leaped to IDR18.8 trillion and centered on bonds maturing in over 10 years.
  • Asian dollar credits: Slightly weaker, but overall were held steady on Tuesday, supported by decent demand. Sovereign papers were little changed on Tuesday. Philippines Mar’26 was flat at 119.04 while Vietnam Nov’24 inched higher by 0.02 to 105.12. In primary market, Greentown China’s perp NC3 was guided at 5.25%. Apart from that, Industrial Bank of Korea was reportedly looking to issue Additional Tier-1 bond.

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