FW: CIMB Fixed Income Daily - 20 Mar 2018 - Treasuries weaker ahead of FOMC

 

 

CIMB Fixed Income Daily - 20 Mar 2018 - Treasuries weaker ahead of FOMC

UST weakened marginally on cautious sentiment ahead of FOMC meeting this week. There was pullback in yield upticks late Monday as equities markets sharply dropped. The 2T was well anchored at its high range at 2.31%, leaving a wide 81bps spread against Fed Funds rate upper bound, compared to previous peaks around 70bps since 2015. While markets widely anticipate Fed to hike this time around, in line with current policymakers' forward guidance, focus will be on the shift in Fed stance instead of the rate hike decision. Treasuries remain supported amid the current risk-averse sentiment, but we think will eventually be weighed by prospects of solid progress in growth, inflation, rate hikes and bond supply in the US. Hence, our forecast for 10T is 3.00% by 2Q18, 3.10% by 3Q18, and 3.20% by 4Q18.

MYR bonds closed on weaker tone amid muted flows on Monday. Similarly, the IRS rates inched up by around 1bp on the shorter tenures up to 7-year. Aside, the newly priced 7y MGS benchmark was under profit taking pressure and closed wider at 3.85%. Elsewhere, there was also little driver as USD/MYR moved within range of 3.91-3.92. Upcoming catalyst will be Feb CPI this week, where consensus sees it to moderate further to 2.0% from 2.7% in Jan. This should boost MYR bonds in the short- to medium-term horizon. If this is the case, support looks likely around 4.00-4.01%.

In Bangkok, yields at the front-end edged lower by 2bps before the announcement of source bonds while the yield from LB-25 to LB-26 series increased less than 2bps as some players prepared position before the auction of 10y benchmark LB26DA on Wed.  

IndoGBs were pretty quiet on Monday with sentiment guarded ahead of FOMC this week. Support came mainly from domestic players, which supported yields downward

Asian dollar credits were dealt weaker amid cautions heading towards FOMC meeting this week. Apart from that, sustained primary offerings continued to pressure secondary trading. In primary space, Yango Group priced its 1.5y bond at 9.5%, while HSBC Holdings AT1 perp NC5 and perp NC10 were guided at 6.375% and 6.625% respectively.

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
Find us on Bloomberg at CIMR <Go>


Think Before You Print

******************************************************************************************************************************************************
Privileged/confidential information may be contained in this message. If this message is received by anyone other than the intended addressee, please return the message to the sender by replying to it and then delete the message from your computer. Unintended recipients are prohibited from taking action on the basis of information in this e-mail. No confidentiality or privilege is waived or lost by CIMB Group including its affiliates (CIMB Group) by any mistransmission of this e-mail. CIMB Group does not accept responsibility or liability for the accuracy or completeness of, or presence of any virus or disabling code in, this e-mail. CIMB Group reserves the right to monitor e-mail communications through its networks (in accordance with applicable laws). Opinions, conclusions, statements and other information in this message that do not relate to the official business of CIMB Group shall be understood as neither given nor endorsed by it.

CIMB Group Sdn Bhd (incorporated in Malaysia, (Company No: 706803-D)). Registered Office: 13th Floor, Menara CIMB, Jalan Stesen Sentral 2, Kuala Lumpur Sentral,, 50470 Kuala Lumpur, Malaysia.

Visit our website at www.cimb.com ******************************************************************************************************************************************************