FW: CIMB Fixed Income Weekly - 26 Feb 2018 - Powell testimony is next flag

 

 

US Treasuries

·        We look forward to Fed chief Jay Powell's testimony to congress this week whilst data on tap include 4Q17 GDP and PCE, and ISM manufacturing. We think there is support for the market down to 2.80%, whilst downside there's signal for resistance around 3.03%. We're also eyeing a flattish yield curve, expecting 2x10 spread averaging 65bps throughout the week.

Malaysia

·        The 10y MGS (MGS Nov'27) remains above 4.00% after the UST weakness and as we look towards the January inflation data this week. (December CPI was +3.5% versus 3.4% in November 2017 whilst core CPI was 2.2% in December and November).
·        Despite the cautious mood there's chance CPI may surprise on the downside by looking at the stable core inflation. Meantime, firm UST market in the short-term period will support MGS. Also, there's RM3.5b auction of the 10y MGS with additional RM500m private placement (tender closes Tuesday). This adds pressure on the bonds but above 4.07% should attract buyers (WI 4.055%).

Thailand

·        On watch is LB22DA auction, current account data followed by the February CPI Friday. We expect firm auction for LB22DA based on recent demand observation and last week's auction result of LB316A. Also, CPI is expected to remain slow in February (market estimates moderating headline CPI at 0.70% and core CPI at 0.60% yoy in February). Upside surprise in CPI data will increase concerns for bond investors though we only expect small increases in yield, to be offset by month-end mark to market flows.



Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557
www.cimb.com
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