FW: CIMB Daily Fixed Income Commentary - 14 Aug 2017 - Bonds still reacting to geopolitics but aided by Fed doubts / MYR bonds look to auction

 

Market Roundup

• US Treasuries edged firmer, aided by weaker-than-expected US inflation number reported on Friday, which raised doubts on Fed tightening pace going forward. The Jul CPI climbed by 0.1% mom, lower than +0.2% mom forecasted earlier. Apart from that, risk-off sentiment also weighed the yields lower amid geopolitical tensions between US and North Korea.
• USD/JPY consolidated and ended flat at 109.19 on Friday, taking breather after it slipped earlier last week, due to geopolitical tensions. Latest, Japan's GDP grew an annualized 4.0% qoq in 2Q2017 much stronger than consensus +2.5%, which should aid JPY along further. Focus will also remain on the US-North Korea news, where further risk-off trades may push the pair lower and retest the Apr-low at 108.13. On the other hand, USD was dealt weaker in general ahead of weekend, dragged by weaker-than-expected Jul CPI data reported on Friday.
• Malaysia: Sentiment in Malaysian bonds turned weaker ahead of the weekend amid rise in geopolitical tensions. The higher USD/MYR also pressured on bonds, with EM currencies broadly weaker against USD. Meantime, WI for the 3.5-yer MGS was heard wider at 3.50% on Friday, compared to 3.45/40% guided a day earlier on Thursday. We expect demand for MGS to be steady ahead of anticipated relatively slower reading in 2Q2017 GDP due out this week. Consensus for 2Q2017 GDP is +5.3% yoy against +5.6% the quarter before.
• Thailand: Yield curve continued to steepen on Friday for a second consecutive day of profit taking by local players and yields rose about 2-4bps in the mid- and long-end. Players looked to sell govvies before Thai market closed for the on long weekend and will return to trade on Tuesday. However, rising yields contained in late session as some asset managers were seen buying on dips. Foreign investor sold long-term bond at Bt848 million but they returned to short-term buying at Bt9.83 billion.
• Indonesia: IndoGBs continued to trade weaker on Friday, following global risk-off mode due to Trump-North Korea war of words. Support bids were still strong though, as players hoped to buy bonds at cheaper prices. Most actively traded bonds remained bonds in the 10-year bucket, especially benchmark FR59. Market closed with yields higher 2-4 bps on the belly to long end. Total volume was IDR13.6 trillion and centered on bonds maturing in over 10 years (41%).

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