FW: CIMB Fixed Income Daily - 27 Mar 2018 - IDR bonds under selling pressure, weighed by weaker sentiment

 

 

CIMB Fixed Income Daily - 27 Mar 2018 - UST weakened on the back of improved risk sentiment

UST yields climbed across the curve, reacting to the dissipating fear over potential trade war between US and China, as both countries seek for further discussion on trades. In primary space, the $30b 2T auction saw healthy demand with 2.91x btc, in contrast to average 2.85x registered in previous twelve similar auctions. High yield was 2.31%, slightly above WI 2.306% while indirect bidders accounted 44.5% of the auction. Pending new catalysts, the 10T is expected to continue consolidating within 2.80-2.90% range at this juncture.

Trading activities remained muted in Ringgit govvies space on Monday, with flows led by GII Jun'33, Mar'21 and Jul'27. Meantime, the sovereign bonds were little changed amid lackluster trading interest. Apart from portfolio rebalancing activities, focus should be on the 3y MGS reopening auction scheduled this week.

Thai government bond yields rose 1bp starting at 7-year tenure and extended to the rest of the curve. Bond curve was slightly steeper largely due to the announcement of destination bonds on Monday causing selling pressure in the bellies and long-ends. LB22DA, LB26DA, LB316A, LB326A, and LB676A were the destination bonds announced after market closed Monday.

IndoGB opened with a slightly improved tone on Monday, market bids looked solid although nobody were willing to chase the offers. However after the news reported that US is ready to open dialogue with China to avert trade wars, market improved led by activities in 10y benchmark series, where FR64 was traded higher and closed with yield lower by 7bps, while the rest of the curve also followed suit. Today MoF will be holding bond auction with IDR17t target, we expect the incoming bids to improve after Monday's positive tone. Market volume doubled to IDR25.5t and dominated by long term bonds.

Flows were muted in USD credit market, despite ease in trade conflict concerns as US Secretary of Treasury Mnuchin hopes agreement to be reached in between US and China. In primary space, Agile Group guided its $100m perp NC5 bond at 7.056%. Elsewhere, Bloomberg news reported that China Construction Bank is looking for Tier 2 bond issuance.


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