MYR bond yields moved lower whilst IRS a tad higher amid a quiet market amid the CNY break. MYR was pretty firm after overnight UST gains but did little to boost MGS amid the lack of participation. We expect cautious mood to sustain in the short-term period up to release of January CPI (December CPI was +3.5% versus 3.4% in November 2017 whilst core CPI was 2.2% in December and November). There's chance CPI may surprise on the downside by looking at the stable core inflation; and as we also expect support for UST market in the short term period, we raise short term expectation for 10y MGS by just a tad to 4.07%.
Thai bonds saw thin liquidity and moved in a narrow range with US market closed for President's Day and China market closed for the week-long Lunar New year. Compared with last week's offshore interest on the front-ends, demand for front-ends declined to Bt1.04b on Monday after 4Q17 Thai GDP failed to beat the estimate of 4.3% yoy. The NESDB maintains forecast of 2018 GDP at 3.6%-4.6% range backed by exports, public spending, and pronounced pick up in private consumption. Tourism sector remains a key driver for 2018. While GDP growth reading was below estimates, it does not shift market expectation from optimistic growth outlook, and thus, we see the risk LB316A auction may receive soft demand.
Firm US Treasury overnight did not translate into improved IndoGB yields. Just before closing hour, small buying flows were seen on selected papers around 10y maturities. Yield curve rose 2-3bps on average. Market volume decreased to IDR13.8t whilst trade concentration shifted to the front end of the curve. We expect 10y bonds to trade between 6.25-6.45% this week amid anticipated support in UST, lack of data releases and stability in Indonesia's CDS levels.
The Asian dollar credit space remained quiet with participants still away from their desks. The iTraxx Asia ex-Japan IG index was spotted 0.5bps wider. The primary market was similarly quiet, but we understand upcoming deals as per Bloomberg include Sichuan Languang and industrial chemicals company Jiangyin Chengxing Industrial.
Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
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