FW: CIMB Fixed Income Daily - 12 Feb 2018 - US government spending raises credit questions

 

 

 

The government passed a budget agreement to raise spending by $300b over two years, which ended a government shutdown but raised worries over increased US government debt and spending. This came alongside Moody's warning of potential credit downgrade on the US on deteriorating fiscal discipline. But US Treasuries ended on firm note with continued stock market weakness.

MYR sovereign bonds closed mixed on Friday. Secondary trading saw heavier flows driven by activities along benchmark papers on front end and belly of the curve. Elsewhere, industrial production expanded by +2.9% the same period, which was well below consensus of 4.6%. These bring up questions to the coming week's release of Malaysia's 4Q2017 GDP data. Consensus forecast amongst economists is 5.7% growth rate for the final quarter of last year (3Q2017 growth was +6.2% yoy). Nevertheless, missing this consensus expectation may well provide additional support for the safer MYR government bonds into the short and medium term horizon.

Thai government yields increased in a bear-steepening move led by underperformance in long-ends from 18-23y tenures as global equity and bond sell-off intensified. Foreign investors maintained net sell position in Thai bond throughout the week as USD/THB spiked to 31.7.

IndoGB yields rose early on Friday in line with UST move as well as USD/IDR that touched 13650. Yields mostly moved on the 7y and above. We saw some offshore banks selling medium tenor bonds though strong support was also seen whilst local players took opportunity to buy on dips. Overall, IndoGB moved up 2-4bps. Market volume was IDR 14.7t and trade was concentrated on in the tail end of the curve. Executive Director of Monetary Management Zulverdi at BI said that the Rupiah's weakness is in response to the global markets selloff while domestic economic fundamental are positive to support a stable exchange rate

Asian Dollar credits widened, weighed by poor sentiment following selloff in global stock markets. On top of that, regional spreads further widened by up to 4bps ahead of weekend. Elsewhere, primary space was muted as issuers awaited better timing for their new issuances.

Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
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