FW: CIMB Fixed Income Weekly - 14 Nov 2017 - Mixed short term outlook for MY, ID and TH bonds

 

 

US Treasuries

• While USTs were downbeat over the last week, sentiment should improve if inflation data (CPI and PPI this week) come out benign as expected. We expect gains along the bellies of the curve whilst targeting 2x10 spread to remain near 75bps this week Meantime, 2T over upper bound of Fed Funds Rate (FFR) has widened to around 40bps from around 25bps a month ago. Mean average of this spread is 25bps over the past five-year period.

Malaysia

• Policymakers left OPR unchanged at 3.00% which was in line with CIMB economist's forecast and widely expected by the markets. However, the statement surprised by striking a hawkish tone, as the MPC "may consider reviewing the current degree of monetary policy accommodation" sooner than expected. Taking cue from the hawkish tone, CIMB economist has revised CIMB's policy interest rate outlook for 2018 from no change to a 25bps hike to 3.25%, possibly as early as the Jan MPC meeting.
• We expect 3y MGS to be pretty stable around 3.50% which is already a very wide 50bps over current OPR. This leaves net selling pressure more on the bellies and far end of the curve, but we think IRS will see a faster impact   expecting 5x5 swap spread to widen to 15bps in the immediate term.

Indonesia

• Indonesia's GDP growth crept up slightly to 5.1% yoy in 3Q2017 (+5.0% yoy in 2Q2017), in line with CIMB's expectation but below consensus estimate of +5.2% yoy.

GDP just missing estimates and outlook for sustained policy direction should have little impact on bonds in the short term period.  Yields could consolidate around the 6.70-6.73% shoulder

Thailand

• Increasing supply is a negative given some selling over the last few days and the auction of LB22DA could face a long-tail risk. We expect a gradual rise in Thai sovereign yields and maintain expectation 2x5 spread will rise toward 44bps (last week 41bps).

Best Regards,
CIMB Treasury & Markets Research
Tel: +603 2261 8557
www.cimb.com
Find us on Bloomberg via CIMR <Go>
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