Tuesday, April 10, 2018

FW: CIMB Fixed Income Daily - 10 Apr 2018 - Despite short term vulnerability, still upbeat on MY bonds



CIMB Fixed Income Daily - 10 Apr 2018 - Despite short term vulnerability, still upbeat on MY bonds


US Treasuries began the week on weaker note though yields ended up just 1-2bps mostly along the short to bellies of the yield curve and stuck within range most of Monday. There was little in terms of fresh drivers but players were mostly unmoved by recent trade conflict concerns. Last week, US versus China trade news had hogged headlines but last Thursday saw speculation that both sides were willing to negotiate to avert a trade war. White House chief economic adviser Larry Kudlow said China’s threat to employ tariffs on major US products may not take hold as he saw it as a negotiation tactic on the part of China. Yet, following that Trump has ordered US Trade representative Lighthizer to consider $100b in additional tariffs in response to ‘China’s unfair retaliation’.


Malaysian government securities recorded weaker prices due mainly to profit taking action on Monday. We think short term remains fragile to more profit taking action, as recent upticks in yields were accompanied by higher volume than usual. That said, despite some short term pressure we remain upbeat on short tenor MGS. Support for 3y MGS remains 3.50% (next 3.57%).


The Thai government bond curve shifted in a bull flattening, safe-haven, move in line with the UST curve. Long-ends gained moderately within 1bp as risk-off sentiment was sparked by trade tensions between US and China. At the same time, there were some profit-taking flows in the destination bonds from the players taking the bonds in higher yields as a result of the bond switching last week.


In Indonesia, the IndoGB market was mostly quiet on Monday but remain supported. There was continued offshore inflow but overall volume was limited. In general market was supported but volume was low. Movements were concentrated only along the short tenors. On Tuesday, MoF would be holding a conventional bond auction to offer the usual 3m and 12m SPNs and 5, 10 and 15y bonds.



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