FW: CIMB Fixed Income Daily - 07 Mar 2018 - Regional bonds mixed on external risks / Bank Negara Malaysia policy meeting today

 

 

CIMB Fixed Income Daily - 07 Mar 2018 - Regional bonds mixed on external risks / Bank Negara Malaysia policy meeting today

US Treasuries closed little changed. The market opened firm but gains were wiped out after finding resistance near last Friday's levels. Market also reacted little to declines in factory orders (down 1.4% in January) and durable goods orders (down 3.6%) with economists calling the decline not surprising seeing extended outperformance in recent months. We still await February NFP up on Friday (consensus +200k against 200k in January). Overnight news White House top economic advisor Gary Cohn resigning over disagreements on the recent tariff announcement should support Treasuries in coming days.

Malaysian government steadied particularly on the front end and bellies of the curve, in conjunction with firmer MYR though there was some weakness after overnight UST weakness. There was also some cautious mood ahead of MPC meeting Wednesday, and which pushed the IRS curve mildly higher on Tuesday. Consensus and CIMB economist's view is that the central bank will stand pat on interest rates this time around – especially after the recent rate hike in January and now ease in inflationary pressures. Bank Negara Malaysia announced details for the 30y GII (GII May'47) reopening auction. Issue size is RM1.5b for the public tender, apart from RM1b private placement.

Thai bonds continued their bearish move, steepening with yields rising on the long ends at 2-3bps. Fund rotation before the auction of 50y LB676A could explain the steeper curve though we expect solid demand from lifers to help underwrite the bond smoothly.  

IndoGBs were traded softer on Tuesday, most possibly due to offshore outflows. Market became bearish and caused yields to go up by 8-10bps on average. Incoming bids at the syariah auction only reached IDR8.615t, and MoF issued IDR5.095t (target IDR8t). Market turned resilient towards closing as yields were at the peak this year. Daily volume was sizeable amounting to IDR20.8t while trades concentrated at the belly and the tail of the curve.

In Asian dollar credit market, secondary trading saw mixed trading interest amid weaker footing, after the overnight UST yields rose on the back of improved sentiment. In our opinion, focus will remain on the potential trade conflicts, as well as Friday's US NFP release.


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