US Treasuries closed mixed Friday with little in fresh market drivers except for import prices increasing by 1.0% in January. This was the largest monthly increase since 2012 and follows the upbeat CPI and PPI data earlier last week. This meant the 10T remain near the 2.90% threshold. Players were also cautious ahead of auctions in the coming week; comprising $28b of the 2T, $35b of 5T and $29b of the 7T.
Last Thursday, trading flows along the MGS market was decent despite heading towards the long weekend with net buying interest seen along selected benchmark papers. This was despite the overnight weakness along the UST market, and we think support came from continued strength in MYR currency especially after print of firm 4Q2017 GPD growth. To recap, growth in the fourth quarter was 5.9% yoy (6.2% in 3Q and versus consensus +5.8%). Aside, we also note total government borrowings at RM686.8b or 50.8% of GDP end-2017, or well below the self-imposed 55% ceiling.
Thai bond yields held steady within a tight trading range as most Asia markets were shut for Lunar New Year on Friday. On watch is 2017 GDP data - firm economic growth will strengthen the outlook for a steepening of the curve and this can lead to higher yield for LB316A auction on February 21.
IndoGBs weakened on Thursday in line with UST Indonesia's trade balance was announced showing a large deficit (US$677m) due to imports rising more than expected (26.44% versus 18.30% expectation). Indonesia announced 7D Reverse Repo Rate unchanged 4.25% as expected. Offshore was quiet due to Chinese New Year holiday, leaving support by local players only. Bids were not aggressive, resulting in a rise in yield on average by 5bps. Volume fell to IDR16.20t and trade concentration stayed at the tail end of the curve.
Asian credits saw some firm movement ahead of the CNY break and despite the overnight UST weakness. Support came from continued strength in EM Asia currencies, alongside sustained outlook for upbeat EM economic growth. The iTraxx Asia ex-Japan IG index tightened about 2bps. Along the primary segment, heard planning a USD offering was Sichuan Languang with 5y papers, according to an exchange filing as reported by Bloomberg.
Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
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