Thursday, April 12, 2018

FW: CIMB Fixed Income Daily - 12 Apr 2018 - Regional bonds mixed-to-weaker / Players look for ID off-the-run papers



CIMB Fixed Income Daily - 12 Apr 2018 - Regional bonds mixed-to-weaker / Players look for ID off-the-run papers


US Treasuries began on a firmer note after Trump’s hawkish remarks for a strike against Syria. However, yields found some resistance approaching last week’s lows (intraday hit 2.75%). Meanwhile, shorter dated UST mildly weakened with the 2T up 1bp for the day, as FOMC minutes suggested policymakers were comfortable with Fed’s gradual rate hike path. Supporting the 10T which closed 1bp lower on the day was March CPI down 0.1% mom against zero increase consensus expectation.


Also, the Treasury Department sold $21b of the 10T at steady btc of 2.46x against 2.44x average prior 12 auctions of the 10T. High yield was higher at 2.795% against 2.417% previous 12 auctions and indirect bidders who include foreign central banks ended up with a lower 53.2% of the auction against 64.1% past 12 auctions. The Treasury Budget for March showed a deficit of $208.7 billion versus a deficit of $176.2 billion for the same period a year ago.


Ringgit-denominated government bonds were dealt mixed in relatively quiet market. There was some slacker demand along shorter to medium dated papers amid firmer USD. We also suspect some of the flows were due to bargain-hunting interest and rebalancing activity across benchmark and off-the-run papers.


Industrial production index (IPI) growth slipped to 3.0% yoy in February, below our and market forecasts of stronger growth (CIMB: +3.5% yoy, Bloomberg consensus: +3.3% yoy). Strikingly, Jan’s expansion was revised higher to 5.4% yoy from 3.0% yoy, due to sharp upward alterations to the manufacturing sector, bringing industrial activity closer in line with the strong export figures in January.


Today will be closing of tenders for reopening of 20y GII maturing Aug’37. Amount to be auctioned off will be RM2.5b to add to the current outstanding RM5.0b. The relatively low amounts either way should add to interest during the auction. The 20y MGS maturing Apr’37 was last at 4.57% whilst GII Aug’37 last seen at 4.75%. The 18bps spread should allow some demand in the auction seeing the yield curves have turned relatively flat since the beginning of the year.


In Thailand, the Thai government bond market continued to see a bear-flattening move on Wednesday with foreign selling momentum at the front-ends and foreign buying momentum at the back-ends. Trading activities were thin as local players took days off before the Songkran holidays.


In Indonesia, govvies strengthened with activities concentrated on non-benchmark series, though with exception of 10yr benchmark FR64. Yield for the non-benchmark series are more desirable as they give 5-15bps more than benchmarks in the same bucket. FR64 rally continued from this week’s auction and yields fell-6bps.


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