FW: CIMB Fixed Income Daily - 21 Feb 2018 - Heavy supplies limit Treasuries / Regional bonds still weak

 

 

The US Treasury Department sold $179b worth of 3m, 6m, and 2y securities at rates not seen since 2008, with the 2T now having spiked up 2.22%. The 2T auction worth $28b was sold at 2.255% high yield against 2.256% WI. However, btc was decent at 2.72x (against 3.22x and 2.52x prior two auctions of the 2T). Also, 10T was still under resistance to close under 2.90%.

Amid fears of weakening global bond markets, MYR government bonds weakened on Tuesday. Yields along the front end was up 3-4bps whilst 10y MGS maturing Nov'27 touched intraday high of 4.03% on decent volume near RM200m.

Sell-off in the long-end led to yields rising 3-5bps in a bear steepening move. Meantime, bidding yields for LB316A and LB366A increased to 2.90% and 3.136%, respectively by Tuesday's close. Also, concerns over rising yields caused soft demand at the LB316A auction. We think outlook for faster economic growth plus expected bond switching programs in 1Q2018 are likely to keep expectation of a steeper curve.

IndoGBs weakened on Tuesday in line with UST movement. Meantime, we noted some offshore outflow especially along the medium tenors. Aside, yesterday's sukuk auction only gathered incoming bids of IDR13.3t (versus IDR20.1t previously) and MoF granted IDR8.475t (target IDR8t). All in, IndoGBs closed with yields up 3bps on average. Volume improved to IDR14.2t while trade concentration shifted back to the tail end of the curve.

Asian dollar credits also weakened though trading interest remained low with China still on break. The iTraxx Asia ex-Japan IG index widened by about 2bps. The primary market remains quiet, but Bloomberg reports upcoming deals include those of 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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