Friday, December 15, 2017

FW: CIMB Fixed Income Daily - 15 Dec 2017 - Regional bonds steady post FOMC



US Treasuries. UST yield curve moved flatter, as short end yields climbed, reacting to the rate hike signal by Bank of England and robust Nov retail sales data (+1.5% vs consensus +0.2% yoy), but long end yields were little changed with Fed maintaining its tightening path over the next two years. BoE held its interest rate at 0.5% as market expected, but hinted for potential further rate hikes over the next few years. ECB also stood pat on rates, while seeing inflation to remain below its 2% objective in 2020.

Malaysia. MYR sovereign bond market remained muted post FOMC. Aside, the new 15y GII auction saw relatively weak demand with 1.775x btc for the RM2.0b public tender (another RM0.5b private placement). Average yield registered at 4.724%, within a large spread of 4.668-4.79%, but lower than WI 4.75% quoted a day prior. We think that it appears to be relatively cheap at 4.75%, offering 34bps spread against the 15y MGS, against a median spread of 17bps year-to-date. Technically, we are also seeing limited downside with bargain hunting interest near 4.80%.

Thailand. Yield curve bull flattened as long-end yield edged lower about 1-2bps after long-end UST yields declined about 5bps after FOMC meeting which continued signaling cautious approach of rate hike in 2018. Most of demand for long-ends stemmed from bidding interest of LB26DA as yield looked attractive after the auction last Wed resulted in higher yield range. The auction of Bt50b 2y BOT198A on Thu was well received with 2.19x btc and 1.5306% average yield supported by local and offshore buyers.

Indonesia. Bond market was on better buying mode post FOMC.  We noted strong buying interest especially on longer end of the curve from foreign names.  Local banks remained on profit taking action especially on short end bond/bills.  Market volume decreased a tad to IDR12.2t and concentrated on bonds in the belly and long end of the curve.

Asian Dollar Credits. Asian dollar credits closed on mixed tone, seeing little impact from Fed's decision to raise rate by 25bps during Dec meeting, while liquidity remained thin in secondary space heading into year end. Elsewhere, China Fortune Land's 3y bond was guided at 6.625%, while Shandong Hi-speed's 3y paper was indicated at 4.5%.

Best Regards,
CIMB Treasury & Markets Research-Fixed Income
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