FW: CIMB Fixed Income Weekly - 12 Feb 2018 - Expecting continued Treasuries weakness

 

 

US Treasuries

• We look towards macro data in the coming week as guidance. Consensus for January CPI ex-food and energy is +0.2% mom (+0.2% mom in December 2017), and core PPI ex-food and energy is at 0.2% mom versus 0.1% in December. As we err on faster inflation, we expect sustained or mildly higher yield levels for medium to longer tenor UST.
• We expect profit-taking pressure on shorter dated UST to pare down the steepness of the yield curve. We expect 2x10 spread to tighten mildly to 70-75bps.

Malaysia

• This week we await the 4Q2017 GDP data. Consensus amongst economists is a slower 5.8% growth (3Q2017 was +6.2% yoy). Missing this consensus should provide support for the safer MYR government bonds in the short and medium-term horizon. We also have the January 2018 CPI data due in over a week's time. We note the December 2017 core CPI was stable at just +2.2% yoy.
• The 10y MGS is likely supported below 4.00% in the short term period. With that in mind, we expect the 15y MGS to move lower towards 4.35-4.40% range in the coming weeks.

Thailand

• Thailand MPC is likely to keep interest rate at 1.50% and we expect a more exciting policy statement as global financial markets have imparted volatile swings on USD/THB and govvies yields. The MPC statement could also deliver an upbeat view on the Thai economy (as inflation moves towards BoT's 1.0% target) and this would be interpreted as a hawkish outcome. Thus, we see upside risk in yield movement this week, though absence of LB auctions and the Chinese New Year holidays will limit the sell effect.

Indonesia

• Maintain pressure on IDR bonds. We assume continued weakness in UST this week, thereby expecting continued pressure on IDR govvies. We're expecting 10y bond to move in a bearish 6.25-6.50% range in contrast to 6.33% close last week.

Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557
www.cimb.com
Find us on Bloomberg via CIMR <Go>

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