FW: CIMB Fixed Income Weekly Commentary - 12 Sep 2017

 

HIGHLIGHTS

• US Treasuries

• Short 2T and 10T in a curve steepener. We expect profit-taking pressure to take hold after the recent rally. The 10T dipped below our 2.10% target last week (down 12bps week-on-week) and 2T rallied to 1.26% (down 8bps week-on-week). This week we're suggesting a curve steepener to short both 10T and 2T with 2x10 target spread at 90bps.

• Malaysia govvies

• Long 5-7y GII. We remain overweight MGS and MYR but short term period we propose looking at Islamic GIIs for immediate trading gains. GIIs are lagging the fresh MGS rally, given wider GII-MGS spreads compared to a fortnight ago. We like GIIs with 5-7 year maturities with likely up to 5bps gains in the short to medium term horizon.

• Thailand govvies

• Long 10y bond/maintain 5x10 spread tightening to 60bps. We expect resilience in long-term bonds from supportive local insurance and pension funds. On the other hand, there is a supply risk from the selling of new 5-year benchmark LB22DA and potential higher total issuance size in next fiscal year after the PDMO announcement. Furthermore, bonds in the belly may be lower with improving global sentiment.

• Indonesia govvies

• Target 6.40%. We expect 10-year bond yield to be steady at around 6.40% this week.