US Treasuries. UST continued its move from Monday as the curve flattened amid lessened worries over inflation and front end of the curve steady ahead of already anticipated rate hike in Dec. The $24b auction of 3T garnered firm bid-cover of 2.76x versus 2.81x at 12 prior 3T auctions. High yield was 1.750% or at small tail.
Malaysia. MYR government bond market saw limited movement ahead of MPC week. Yields were slightly higher along 5-7y MGS (up 1-3bps) which may lift the 10y MGS somewhat in coming days. Aside, latest data of foreign holdings in MGS+GII show a small decrease of RM2.2b (down to RM173.0b from RM175.2b) in Oct 2017, but commiserate with decline in outstanding MGS+GII of RM4.2b during the month. In percentage terms against outstanding MGS+GII, holdings by foreigners fell slightly to 27.6% from 27.8% in Sep.
Thailand. Activities were concentrated at the front-end after auction of 182d CB bond received long tail ranging 1.22%-1.47%. Therefore, we think some players sold front-end LB for higher yielding CB. The MPC today is likely to keep benchmark interest rate unchanged at 1.50% as recent data showed subdued inflation and strength in exports and the tourism sector. We believe policy statement will remain optimistic on the economy and rising inflation outlook toward the 1.00% BoT lower bound target. The committee will continue to pay a great deal of attention to financial stability and high-yield seeking behavior while keeping monetary conditions accommodative to support economic expansion. In other words, interest rate will be steady at 1.50% for an extended period.
Indonesia. Indonesian government bonds posted gains as sentiment was boosted by firmer IDR and crude oil price. Some profit taking pressure appeared in late trading but was countered by strong bids nonetheless. Benchmark yields were seen down 7bps along the front and middle of the curve.
Asian USD credits. USD credit spreads slightly widened Tuesday whilst there was mixed movement in newer issued bonds. There was also muted news on the primary front, with upcoming USD denominated deals heard from issuers China Jianyin and Sawit Sumbermas.
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CIMB Treasury & Markets Research-Fixed Income
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