US Treasuries saw modest gains ahead of FOMC on 2 Aug (BoE also 2 Aug). Fed is expected to hold rates (but BoE is anticipated to raise rates with Bloomberg consensus at 0.75%) and also anticipated to mention it remains on gradual hike path. Meanwhile, ahead of US open, the BoJ after its policy meeting came out dovish. BoJ maintained target of zero for 10y JGBs though widened the allowable range around which yields could move. BoJ also provided forward guidance for rates, saying current low rates will run for 'and extended period of time'.
IndoGBs were dealt weaker ahead of yesterday's bond auction which we suspect players trimming some position to buy from the auction. The government received solid IDR45.4t incoming bids (thanks to BoJ cutting its inflation forecasts and kept its 10y yield target unchanged), and the market rebounded despite cut-off on 10y indicated 8-9bps tail.
Thai govvies curve bull flattened due mainly to rally in the long-ends. LB366A and LB466A outperformed with solid buying momentum from foreign investors; and thus the yields plunged about 12bps on Tuesday. Moreover, the auction of 3m and 6m CB received firm demand and led gains at the front-ends ‑ yields dropped less than 1bp. Foreign investors were net buyers of Thai stocks and bonds at Bt1.82b and Bt3.68b respectively.
Ringgit government bonds continued to see heavy flows, led by the 7y MGS at more than RM400m volume whilst it gained further to 3.96% (-2bps). Month-end rebalancing and dovish BoJ supported interest. Last Friday, the RM3.0b auction of 7y MGS (MGS 03/25) garnered strong 3.30x bid-cover and 3.984% average yield.
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557
www.cimb.com
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