FW: MY Fixed Income Outlook 4Q2017_20170921

 

Dear all,

 

MY Fixed Income Outlook 4Q2017: Risk outweighs reward

·         Recent MGS rally had provided a good window of profit-taking opportunity. With monetary policy unlikely to switch to easing mode, fundamentally there is limited room for the curve to move lower.

·         Instead, external risks arising from market underestimating the US rate hike path and complacency on EM portfolio flows may be the sources of volatility.

·         On balance, we think risk-reward has turned less attractive and prefer better entry levels, therefore lowering our outlook on MGS to mildly negative from neutral. We expect the 10y MGS yield to revisit 4.00% by end-2017.