Friday, August 25, 2017

FW: CIMB Daily Fixed Income Commentary - 25 Aug 2017 - Bonds mixed ahead of off-site central bank gathering


Market Roundup

  • US Treasuries ticked lower, amid higher crude oil prices and coupled with profit taking pressure heading to the off-site Jackson Hole central banks gathering and worries over the US government debt limit and possible shutdown. Meanwhile, Kansas City Fed president Esther George stated that more rate hikes are possible despite inflation running below the 2% target.
  • USD was moving in narrow ranges with the dollar index up slightly around 93.30, as markets await speeches from central bankers at the Jackson Hole symposium. Markets are poised to move either way on comments from the central bank leaders from both sides of the Atlantic. president Draghi's speech would be scrutinized for clues on ECB tightening, while chair Yellen's speech will be scrutinized for any signs that the Fed is decelerating. Any comments contrary to the above would be Dollar positive.
  • Malaysia: Government bonds closed firm, partly tracking overnight UST gains and hints of offshore interest. There was interest along the 7- and 10-year MGS which we noted were tad steep versus the 3- and 5-year proxies. In any case, our short term 5-year MGS target is 3.55%.
  • Flows along the MYR credit market was RM400 million. A trio of papers hogged interest – Danga Feb'26 (AAA), SEB Aug'25 (AA1) and Imtiaz II May'22 (AA2). Danga Feb'26 fell 1bp to 4.48% and SEB Aug'25 shed 2bps to 4.60% respectively. We note Genting Cap Jun'22 (AAA) was traded at 4.58% the same time, which look attractive in comparison.
  • Thailand: Auction of 2-year BoT198A drew weaker demand than expected with average yield of 1.5044% and 2.52 bid-cover. Post auction, front-end BoT bond yields edged marginally higher. Foreign investors still maintained net selling momentum at Bt3.88 billion in the short-ends and Bt1.77 billion long-ends. Other parts of the curve was extremely quiet as players avoided building position before Jackson Hole and court ruling on the rice subsidy program. Rates market was more active as IRS shifted higher about 3bps across the curve as 6m-forward swap and THBFIX-6m increased with client flows and suspected flows from agents.
  • Indonesia: IndoGBs saw firm demand as players heard BI's plans to roll out macro-prudential policy to boost funding. Bonds with 3-10 year tenors saw gains with the biddish tone remaining until market close.


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