FW: CIMB Fixed Income Daily - 22 Feb 2018 - Inclusion into index raises IDR bonds

 

 

UST yield curve bear steepened amid late selloff driven by FOMC minutes release. The minutes indicated members agreed that labor market continued to strengthen while economy expanded at a solid rate. More importantly, policymakers expected inflation to gradually rise and move towards the 2% objective over medium term (though several participants were longer-run inflation may slip below the target).

Ringgit government bonds closed mixed with gains mostly seen along shorter-dated GII papers (maturing 2018-2022). Sentiment was not aided after overnight weakness in UST, FOMC minutes due post trading hours, and MYR trending weaker as well, seen within 3.90-92 range most of the day. 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). We think resistance for 10y MGS remains 4.07%.

Thai bonds strengthened led by firm LB316A auction result amid strong end-user demand from local asset managers. It was likely that investors waited for attractive levels to buy - and we think above 2.9% for LB316A is an attractive entry level. Then, the bond continued to gain after the auction with closing level at 2.89%.  Robust local liquidity and light position of foreign holding are key factors that provide support for Thai bonds and the slow the rise in yields amid external environment of surging UST and EGB yields.

Announcement of Indonesia bonds' inclusion into the Bloomberg-Barclays indices (effective 1 June) came as a fresh boost to IndoGBs. The market was biddish and we noted buyers both from local and foreign banks. The market closed with yield down up to 7bps. Volume traded leaped to IDR22.3t while trade concentration stayed at the tail end of the curve. IndoGB and IndoIS will be included in the Global Aggregate (LEGATRUU Index) and Global Treasury (BTSYTRUU Index) indexes. MY, THB and SG bonds have 0.19%, 0.02% and 0.28% weightages in the Global Treasury index.

Asian dollar credit space saw lack of interest as China remains closed. However, there was some buying interest, mostly on bargain hunting ahead of expected return of Chinese moneys in the coming days. The iTraxx Asia ex-Japan was about half a basis point tighter on Wednesday.


CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
Find us on Bloomberg at CIMR <Go>


Think Before You Print

******************************************************************************************************************************************************
Privileged/confidential information may be contained in this message. If this message is received by anyone other than the intended addressee, please return the message to the sender by replying to it and then delete the message from your computer. Unintended recipients are prohibited from taking action on the basis of information in this e-mail. No confidentiality or privilege is waived or lost by CIMB Group including its affiliates (CIMB Group) by any mistransmission of this e-mail. CIMB Group does not accept responsibility or liability for the accuracy or completeness of, or presence of any virus or disabling code in, this e-mail. CIMB Group reserves the right to monitor e-mail communications through its networks (in accordance with applicable laws). Opinions, conclusions, statements and other information in this message that do not relate to the official business of CIMB Group shall be understood as neither given nor endorsed by it.

CIMB Group Sdn Bhd (incorporated in Malaysia, (Company No: 706803-D)). Registered Office: 13th Floor, Menara CIMB, Jalan Stesen Sentral 2, Kuala Lumpur Sentral,, 50470 Kuala Lumpur, Malaysia.

Visit our website at www.cimb.com ******************************************************************************************************************************************************