FW: CIMB Fixed Income Daily - 08 Mar 2018 - Eyes still square on Trump’s threats

 

 

CIMB Fixed Income Daily - 08 Mar 2018 - Eyes still square on Trump's threats

UST started off on firmer footing on the back of stock market declines amid potential trade conflicts and Gary Cohn's resignation. Players are now eyeing on Trump who is allegedly signing in the steel and aluminum tariffs Thursday. However, gains were eventually pared following gains in US stock market late Wednesday. Aside, ADP employment was firm at 235k for the month of Feb, above 200k forecast earlier. On a separate note, Fed Beige Book indicated that policymakers continued to see modest to moderate economic expansion and moderate inflation.

MYR bonds continued to see net buying interest on Wednesday, aided by gains in overnight UST. The central bank as widely expected maintained OPR at 3.25%, sounding positive on domestic factors but raising caution on recent financial market swings and prospects of trade friction. All in, Bank Negara sounds slightly less hawkish. Our economists opines another rate hike later this year will remain data dependent. Meanwhile, WI for the 30y GII was heard quoted at 5.00/4.85%. On the other hand, foreign holdings of MGS+GII took a dip by RM3.68b and stood at 28.7% as at end-Feb.

Thai yield curve steadied on Wednesday after the auction of 50y LB676A saw decent demand within range of 3.432-3.478% and average yield at 3.4515% even as some long-term players did not participate, awaiting bond switching program. Therefore, the auction result lowered concerns over long-tail risk of long-end selling. The auction of new 3y benchmark BOT213A could receive firm demand due to attractive coupon at 1.62% compared with bidding yield of off-the-run 3.78y LB21DA at 1.65% and  3.07y LB213A at 1.609%.

IndoGBs opened quiet yesterday morning though as soon as London opened, yields rose 6bps. Seeing more offshore outflows and current foreign holdings is back to end of year 2017 figure of IDR836t, equivalent to a drop by 0.77% to be 39.05%. Near closing time, locals turned defensive and market recovered slightly. Market volume increased a tad to IDR21.2t while trade concentration shifted toward the front end of the curve.

Asian dollar credits were dealt weaker, as sentiment was dampened by resignation of Gary Cohn. Expect volatility to sustain with ongoing trade war fears. As for primary deals, Power Construction Corp's perp was priced at 4.60%, tighter than 4.875% indicated earlier.


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