UST yield curve flattened Friday amid a lack of fresh drivers. We did hear from a couple of Fed officials: NY Fed's William Dudley said Fed ought to stop shrinking its balance sheet at $2.9t (it was $1.0t before the financial crisis), and; San Francisco's John Williams agreed that three to four hikes this year is the right tightening path. However, these made little clear on Fed's path this year. That's why we look forward to Fed chief Jay Powell's testimony to congress this week (market is questioning the 3 or 4 hike scenario), whilst data on tap include 4Q17 GDP and PCE, and ISM manufacturing.
Malaysian sovereign bonds were traded in tight ranges while activities remained thin Friday. Bank Negara Malaysia announced details for the reopening auction of the 10y MGS (MGS Nov'27). Public tender comes at RM3.5b whilst there will be an additional RM0.5b to be privately placed. WI levels were heard at 4.08/07% late Friday. In addition, the central bank announced two upcoming bond switch programs. The first is repurchase of MGS Sep'19 to be replaced with MGS Nov'26 and second will be repurchase of the same MGS Sep'10 with replacement bond MGS Apr'26.
Thai bonds consolidated in a narrow range on light activity as there were no new factors to drive the market and UST yield corrected lower and tested below the key 2.90% level. Next watch is LB22DA auction on Wednesday and Feb's CPI Friday. We expect firm auction for LB22DA based on recent demand observation and auction result of LB316A. Also, CPI will be released Friday and the watch is whether inflation will stay soft in February. Upside surprise in CPI data will increase concerns for bond investors.
IndoGB rebounded Friday, led by demand from foreign banks in the morning session, and continued with local buying flows from real money players afterwards. The net buying activities focused on the belly to long end (up to 20yr tenors). In general, market looks well bid, supporting the theory that prior day's slump was oversold. Volume decreased to IDR17t, concentrated on the far end.
Asian dollar credits were traded on firmer tone, tracking slight recovery in overnight UST following previous day's selloff. In the primary space, Redco Properties sold 1y note at 6.375%, while Bank of New Zealand priced its 5y paper at 85bps above UST. Expect primary market to see heavier flows as investors returned from CNY holidays.
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