FW: CIMB Fixed Income Daily - 02 Mar 2018 - Safe haven flight over potential trade conflict

 

CIMB Fixed Income Daily - 02 Mar 2018 - Safe haven flight over potential trade conflict

UST extended gains amid flights for safer haven assets. There were concerns on potential trade conflict after Trump said he will impose 25% and 10% tariffs on steel and aluminum imports as early as next week. However data releases were strong. Personal income increased by 0.4% in Jan, above consensus 0.3%. Core PCE was in line with expectation at +1.5% yoy during the same month. Meanwhile, the ISM manufacturing index registered a reading of 60.8 in Feb, above consensus 58.7, and up from 59.1 in Jan.

Malaysian sovereign bonds were dealt firmer amid thinner flows. In our opinion, sentiment was aided by recovery in overnight UST along with softer-than-expected inflation data release a day prior, though USD/MYR inched higher to 3.93 late Thursday. Apart from MPC meeting slated for 7 March, upcoming data on tap will be Jan trade numbers scheduled for next Monday.

IndoGB posted gains although USD/IDR broke 13,800 level momentarily. After BI stepped into in the FX market, bonds were firmer and traded up on the back of local real money buying flows. Among the heavily traded series were 05/22 FR61 and 05/27 FR59, and overall yield curve fell around 5bps. On London hours though market traded weaker, suspected offshore outflows drove prices lower and halted buying activities in the market, and the day closed with yield curve down only 2bps on average. Market volume fell to IDR21.8t while trade concentration was evenly divided across the curve.

Secondary space in Asian dollar credit market remained under pressure due to active primary deals, despite UST yields correcting lower from previous day surge driven by hawkish Fed chief's comment. Fantasia's 3y bond was guided at 8.5% range. Aside, Trafigura will be meeting potential investors beginning 5 March for its USD issuance.

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