- US Treasuries weakened with a steepening of the curve, reacting to higher JOLTS jobs report and players wary amid reported large supply of corporate bonds coming into the market. The Jobs Opening and Labor Turnover Survey indicated 6.163 million number in Jun against 5.666 million openings in May and consensus 5.750 million. We think 10T above 2.30% could bring in bargain hunting interest.
- With the absence of central banks and politics, data is taking its turn in the spot light. The very healthy NFP last Friday fed into the record JOLTS numbers. Today we will have unit labor costs which is expected to come in at 1.1% down from the 2.2% reading in the previous quarter. This series is very erratic even reaching as high as 10% in 4Q2014. Since then it has gyrated between 5.7% to -4.6% with the majority of readings in between 0% and 5%. However, this time with markets intently paying attention to labor numbers, a beat there would give further support to USD. Still, we expect gains to be limited owing to the erratic nature the data and is likely to come in lower than the previous reading. Attention will also be placed on the upcoming inflation number on Friday.
- Malaysia: MYR bond market saw boost along select tenors with flows slanted towards short and medium dated papers. Upcoming focus will be the announcement for new 3-year MGS auction, in which we expect an issue size of RM4.0 billion.
- On the other hand, foreign players remained net sellers for second consecutive month, trimming RM1.46 billion in MGS+GII holdings in Jul, sending total foreign holdings to 26.5% of total outstanding MGS+GII from 27.2% in Jun.
- Thailand: Thai bonds gained along the curve on Tuesday against a quiet domestic data calendar. Sovereign curve continued to flatten, with mid- to long-end down 2-5bps. Front-end demand remained solid as the auction of 91-day, 182-day, and 364-day CB bond totaling Bt105 billion was well-received and foreign appetite for Thai bondS again appeared strong (with net purchase of short-term bond at Bt13.36 billion and long-term bond at Bt7.82 billion). We expect today's LB466 supply will be digested with relative ease as current price level at 3.31% looks fairly valued.
- Indonesia: IndoGBs were traded up on auction day, as the government received huge incoming bids of IDR58.6 trillion, while targeting to issue IDR15 trillion. The government used the opportunity to upsize the issuance to maximum IDR22.5 trillion. The demand comes on the back of local buying as market looks flushed on IDR liquidity. Yield fell 4-6 bps across the curve. Market volume doubled to IDR14.4 trillion and dominated by bonds maturing within a year (31%) and bonds maturing in over 10 years (31%).