UST curve bull-flattened with 2T yield well anchored at the high range while the longer dated corrected lower along with bunds paring losses late Thursday. ECB kept it stance unchanged as widely expected. Draghi said there will be little chance of a rate hike this year. He also pointed EUR strength is a source of uncertainty, and may reconsider its policy going forward if it eventually "lead to an unwanted tightening of the monetary policy".
MYR govvies attracted light demand post MPC. Bank Negara raised the OPR by 25bps to 3.25%. Overall, it is more upbeat on global growth compared to its view at the previous MPC meeting in Nov 2017. We reckon that the central bank's stance leans to hawkishness and our belief is commodity prices will soon factor into higher headline inflation, especially when coupled with the optimistic growth outlook. Our house view is for a potential hike in 2H2018. Flows were muted, though we noted some buyers tapping on selective off-the-run MGS in conjunction with stronger MYR. The 5y GII attracted demand post MPC and settled marginally lower by 1bp at 3.88%. As for the 15y MGS, WI was heard at 4.48/40%. We think that it will be priced at the range of 4.40-4.45%, with little upside up to 7bps looking at a median spread of 46bps against 10y benchmark in the last 6 months.
Solid demand in Thai bonds. Government bonds were well bid along the curve and mid-end outperformed on Thursday due to foreign purchasing interest which oversee investors registered as net buyer at Bt7.0bn. Solid demand for Thai bonds was driven by surging Baht to a 4-year high or USD/THB at below 31.50.
Indonesia's govvies under pressure. IndoGB showed positive signs when market opened on Thursday, as USD/IDR broke below 13300 and triggered bidders to appear especially on 10 and 20y bonds. However buying interest could not sustain as players were seen trimming positions ahead of next week's bond auction, causing market to weaken a tad with the curve higher by 1-2bps. Volume decreased to about IDR22.4t whilst activities were concentrated at the long end of the curve.
Asian dollar credit market traded in mixed tone. Focus remained on the persistent pipelines on Thursday. In primary space, Ronshine's 3y puttable bond was likely to be priced around 9%. Aside, Bloomberg news reported that FWD perp NC5 and BOC Aviation's 5y paper were guided at 5.75% range and T+130bps.
Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
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