Thursday, August 17, 2017

FW: CIMB Daily Fixed Income Commentary - 17 Aug 2017 - Regional bonds mixed / No surprises from BoT / Agree to disagree at Fed

 

Market Roundup

  • The release of the FOMC minutes pressed US Treasuries higher amid differences of opinions within the committee. The release shows some members expressing the need for patience due to concerns over the recent decline in inflation. As such they argued the Fed could afford to be patient and ensure that inflation is on track before moving. On the other hand, other members expressed worries about risks coming from improving labor markets. They argued that pulling back from the steady path could cause the Fed to overshoot its employment target and cause financial instability. Yet, members agree that the balance sheet normalization should begin relatively soon.
  • USD dropped sharply and to within touching distance of 1.1780 before retreating slightly and settling slightly below that level. The FOMC minutes also showed that members were confident about the economy and have downgraded expectations of fiscal stimulus from the government. Markets were again reminded of the chaos in the White House after the end of the Manufacturing Council and Strategy & Policy Forum following the resignation of several CEOs from the council in reaction to Trump's  stance over the violence in Charlottesville.  
  • Malaysia: MYR government bonds were dealt mixed, amid mild selling pressure on the new 3-year proxy. Despite weakness in overnight UST, MYR bonds were supported and held up relatively steady, suggesting limited downside at this juncture. On the other hand, flows were led by off-the-runs along the bellies and longer end of the curve, possibly driven by duration extension activities.
  • Thailand: Yields fluctuated but the issuance of Bt20 billion 10-year benchmark LB26DA was well received with 2.34 bid-cover and tight range of 2.4389-2.445% supported by demand from local funds. Meantime, foreign investors were net sellers of Thai bonds (selling short-term bonds by Bt16.40 billion while buying long-term bonds at Bt8.43 billion) as the MPC voted 6-to-0 to leave the interest rate unchanged at 1.50% without surprises in the policy statement. There is no signal that key interest rate will be adjusted basing on unchanged view on moderate growth outlook and inflation outlook together with unanimous decision with one member unattended. It was the 18th consecutive meeting of steadied interest rate since 29 April 2015 and the MPC still maintained the tone and languages of previous meeting on 5 Jul that growth continued to moderate and inflation was low due to supply side factors especially weak fresh food prices.
  • Indonesia: IndoGBs were traded sideways again, continuing the pattern for this week. Some net buying flows were seen in the afternoon session on 10- and 20-year buckets, but offer looked thick and kept the flows from moving the market.. Total volume leaped to IDR19.7 trillion and the most traded bonds maturing in between 5 and 10 years (42%).



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