Thursday, August 24, 2017

FW: CIMB Daily Fixed Income Commentary - 24 Aug 2017 - Bonds in range / Shorter tenor IDR bonds supported by BI decision


Market Roundup

  • US Treasuries posted firm gains with yields down 4bps along the longer tenors. Aside, the 3M bills rose about 3bps on the debt ceiling fears. Demand for the longer end UST was stoked on Trump's comments he would prefer to build the border wall even if it means forcing a government shutdown to pressure Congress. House speaker Ryan also indicated preference for the wall but allayed fears the government will have to shut down. Ahead of the Jackson Hole symposium ECB's Draghi spoke in Germany but offered little signs on monetary policy though this could be construed as easing his on prior hawkish tone amid the strong EUR.
  • MYR was a tad firm this morning around 4.2782 with USD backing down (DXY around 92.2). Malaysia's headline inflation slowed further to 3.2% yoy in Jul (3.6% yoy in Jun), below our economist's forecast of 3.3% and consensus 3.4% yoy. The headline CPI fell 0.1% mom (-0.2% mom in Jun). YTD, inflation continued to edge lower to 4.0% yoy (+4.1% yoy in 1H17). Our economist has reiterated her headline inflation forecast of 3.5% in 2017 (+2.1% in 2016), as she expects fuel prices to remain broadly flat for the rest of 2017 while boost from higher cooking oil prices last year should fade sharply in Nov and Dec. She expects Bank Negara Malaysia to maintain the OPR at the current 3.00% until end-2017 against a backdrop of strong growth and a lack of demand-driven price pressures.
  • Malaysia: Government bonds steadied but gains were limited after overnight UST losses (after reports of some positive developments on the US tax plan). Short tenor govvies showed weakness. Malaysia's Jul CPI was +3.2% yoy against 3.4% consensus and prior month's +3.6%. Fuel inflation continued to moderate in Jul, but the upturn in global oil prices have led to an upward bias in the coming Aug inflation, thus paring bond sentiment Wednesday. Core inflation ticked higher by 2.6% in Jul (2.5% in Jun).
  • Thailand: Most bonds were traded in a tight range in the front- and mid-end. Net buying interest of 8-year LB25DA was felt when it hit  2.31% (the yield last traded at key support of 2.30%). Also, long dated bonds starting from 14-year LB316A posted mild gain about 1bp.  Foreign investors decreased positions in short-term and long-term papers with net-sell position Bt2.90 billion as the baht weakened to 33.35 against the dollar after Thailand's trade balance unexpectedly recorded at deficit of $188 million in Jul as imports rose 18.45% yoy, more than expected and exports expanded  at slower pace of 10.48% yo. Today's auction of 2-year BOT198A should be well-received as the 1.49% coupon is seen picking up from current yield of 2-year LB198A at 1.485%.
  • Indonesia: IndoGBs opened higher with yield curve down 10-15bps in the morning session, after BI announced surprise 25bps rate cut (7-day reverse repo rate to 4.50% from 4.75%) the day before. However, the higher prices were short-lived as players took profit, mainly done on 10-20yr benchmark bonds.


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