Thursday, October 26, 2017

FW: CIMB Fixed Income Daily - 26 Oct 2017 - Tracking UST weakness



US Treasuries. US Treasury yields spiked up, aided by stronger economic data releases, as Sep durable goods orders expanded by +2.2% yoy against consensus +1.0%, and new home sales registered at 667k in Sep, above 554k projected earlier. However, yields eventually pared lower, with players eyeing on Fed chair nomination, progress on tax plan and ahead of the ECB decision today. The $34 billion 5T auction saw decent btc at 2.44x, while high yield was 2.058%.

Malaysia. Malaysian sovereign bonds were tracking UST losses on Thursday. The 10yr hovered at 3.95%, while 7yr MGS was traded 2bps wider at 3.99%. We reckon that the 10yr MGS possibly retest 4.00% if UST weakness persists. Aside, WI for the 30-year MGS was quoted wider at 5.00/4.77% this morning. The reopening auction may be weighed by weak sentiment, but buying interest should emerge if it is priced above 4.90%.

Thailand. Thai government bond curve bear-steepened catching up with higher UST yields with 10T surpassing 2.40%. Surprising weak auction result of LB316A lifted 15-year yield as much as 5bps and led the rise in yields along the bellies to far-end about 3bps. The auction of LB316A was received with long tail within wide range of 2.631%-2.674% for and average yield of 2.6545%, or 3bps higher than pre-auction level. LB316A extended loss after the auction with last trade yield at 2.67%.

Indonesia. On Wednesday, IndoGB further weakened in line with higher UST yields and stronger USD. Bond market was in offerish tone since market opened and defensive bids appeared in small size, gradually sending yield curve up by 10-12bps. On the local front, parliament approves 2018 budget proposal, with budget deficit targeted at 2.19% of GDP next year (lower than 2.92% in 2017), with assumption 5.4% GDP growth, +3.5% inflation, and USD/IDR at 13,400. No knee-jerk reaction was seen after the news.

Asian USD credits. China IG credits were dealt firm, supported by anticipation of strong demand in China sovereign offerings on Thursday. China will be issuing 5 and 10yr unrated tranches, where investors are expecting them to be priced at 30-40bps above UST. Elsewhwere, Korea Housing Finance Corporation's covered bond maturing 2022 was heard pricing within range of 100-105bps above UST.

Best Regards,

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