FW: CIMB Daily Fixed Income Commentary - 11 Sep 2017 - Regional bonds firm / IDR fx appreciates 100pips

 

Market Roundup

• US Treasuries inched firmer on Friday. Demand was up on safe haven assets with fresh concerns from the full impact to economic growth due to the hurricanes Harvey and Irma, despite US debt ceiling was raised in order to keep the government operating for another three months. As expected, the debt ceiling deal attracted criticism from Republicans, as Trump chose to collaborate with Democrats to get the funding measure passed. This week, Treasury Department will conduct several auctions which include 3T ($24 billion), 10T ($20 billion), 30T ($12 billion).
• IDR appreciated by 100 pips. Hostile USD selloff since Jakarta market opened with possible local demand at 13280 halted USD in early session, yet second wave hit IDR to its strongest level in a year at 13200 and closed at 13200/205. IDR new trading window was at 13200-13400 with consolidation level at 13275/300.
• Malaysia: MYR government bond market continued to see heavy flows slanted towards benchmark papers on Friday. The yield curve bull-steepened with 3- and 5-year MGS yields down 6bps each, supported firm MYR (USD/MYR dipped below 4.2000). We reckon positive sentiment will spur demand for longer dated papers. Upcoming data will be industrial production slated for release 11 Sep, where consensus sees +5.0% yoy growth for the month of Jul. As for primary offerings, we are anticipating announcement of 5-year MGS reopening auction, with expected size of RM3.5 billion.
• Thailand: Thai govvies curve stayed bull-flattening on Friday as external environment supported bond buying. EGB and UST curve shifted lower after the ECB lowered inflation forecasts in 2018-2019 and kept policy unchanged. Concern about impact of Hurricane Irma and Korean situation also underpinned demand for fixed income securities. Foreign players remained aggressive buyers of Thai bonds with net buy of front-ends at Bt16.19 billion and long-end Bt1.06 billion. The auction of 14-day central bank bond drew strong demand at average yield 1.1054%, lower than the past three auctions. THB govvies yields edged lower 2-4bps for maturities longer than and equal to four years. LB366A outperformed (down about 4bps) as some bidders failed to get the bond on Wednesday's' auction. In the coming week, after LB226A auction on Sep 13, LB bond supply will appear light and this should keep the curve flat. Then, the PDMO will announce the market dialogue for fiscal year 2018 on 14 Sep. In last the PM statement, the government plans to run large deficit budget at Bt450 billion for next fiscal year to support economic expansion. Therefore, increasing supply issuance is highly possible.
• Indonesia: IndoGB rallied Friday on the back of weaker USD due to geopolitical risks. Market was biddish from the start as buyers raced against each other to get bonds at the earliest, and USD/IDR broke below 13300 as a result. In particular, bonds tenured 5- to 10-year were in demand, followed by 15-year benchmark bonds. Market remained strong until closing, yield curve fell on average 12-14bps. Volume leaped to IDR25.1 trillion and dominated by money market bonds and bonds maturing 1-5 years.

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