Tuesday, August 29, 2017

FW: CIMB Fixed Income Weekly Commentary & Strategy - 28 Aug 2017



  • US Treasuries
    • Long 10T towards 2.10%. While there has been a lack of expected cues from Yellen and Draghi at Jackson Hole, the shift toward sustainable monetary policy will continue and probably reinforced by the renewed focus on financial stability.
    • Short 2T as spread versus the FFR is tight while debt ceiling risk and balance sheet run-off rhetoric may soon spook the short-end of the curve.
  • Malaysia govvies
    • MGS (and IDR) offers spread and carry. In view of possible depreciation of EM Asia FX amid policy divergence against the G3, the call on EM Asia bonds is easier on an ex-currency return basis. Amongst the MIST markets, Malaysia and Indonesia offer good LCY credit spreads and carry stability. Data show MYR LCY 5-year bonds against its 5-year CDS is around 67bps above historical average and IDR LCY 5y bonds 23bps above average.
    • Long 10-year MGS. The 5-year MGS has come down more than the 10-year MGS since 2Q2017. With benign inflation, we think it's possible for the 10-year MGS to decline further. The 5-year MGS was near 3.80% at start of Jul and 10-year MGS was at 3.98%. The 5-year MGS is now below 3.60% but the 10-year remains >3.90%.
  • Thai govvies
    • Auction set for demand. This week's LB666A auction should receive firm demand from insurance companies and long-term investors with first target at 3.50% as the size is small at Bt7.0 billion relative to market demand.


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