FW: CIMB Fixed Income Weekly - 07 Nov 2017 - US Treasuries weigh on regional bonds

 

 

US Treasuries

• UST closed mixed as sentiment was driven by tax reforms news, new Fed chief, quarterly refunding and less than impressive jobs data.
• Recent central bank policy had been dovish - at the Fed, BoE (raised rates but growth risk still weighs on outlook), and BoJ emphasizing low inflation.
• Technically, we reckon the 10T will be in range but major resistance appear to be 2.50% in the near term period.

Malaysia

• Amid lack of interest in secondary trading and last couple of days' surge in USD levels (Dollar index near 95.0), we see risk in benchmark short tenor bonds in the very immediate term horizon. With that, we think players focus will turn towards off-the-run papers in the front to the bellies of the curve, whilst being cautious along 10-15y tenors ahead of this month's 10y GII and 15y MGS reopening auctions. Still, we think MGS curve would steepen this week as players watch their duration holding amid risk of higher USD.

Indonesia

• As we opened this week, IDR bonds have mildly weakened seeing the firmer USD (with yields up 2-8bps). This negated impact of weaker than expected 3Q GDP (+5.06% yoy versus +5.19% consensus).
• Despite the weaker start, we take a cautiously optimistic view this week, and place 10y bond target at 6.50% assuming a more stable UST movement in the coming days.

Thailand

• Taking cue from low inflation and expected new LB supply slanted towards longer tenures in the coming month, we expect steeper LB curve within 2x5 spread with targeting spread at 44bps (current  spread at 37.6bps).

Best Regards,
CIMB Treasury & Markets Research
Tel: +603 2261 8557
www.cimb.com
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