CIMB Daily Fixed Income Commentary - 07 March 2014

Market Roundup

• On Thursday, US Treasuries weakened on the back of slightly lower than expected jobless claims report, coming just before the non-farm payrolls on Friday.
• It was a quiet day for Malaysian government bond trading on Thursday. Players stayed as they awaited the MPC meeting results after hours. Also, global sentiment was also sustained as markets await the February non-farm payrolls numbers.
• As expected Bank Negara’s Monetary Policy kept the Overnight Policy Rate at 3.00%. Bank Negara mentioned improvements in the advanced economies; and for Asia, improvements in the external sector. For the Malaysia, Negara says latest indicators point to further improvement (exports and private sector investment spending), and going forward, this trend is expected to continue.
• Still, we think Bank Negara was sounding a dovish side this time around, mentioning expected moderation in domestic demand. Meanwhile, Negara did not sound confident on inflation, signalling inflation is more due to domestic cost factors, while the moderate domestic demand will contain inflationary pressure.
• IRS rates showed a small upswing, which pulled Baht government bond yields. We think some repositioning was done after the recent downward yield movement, coming ahead of next week’s MPC meeting. Still, at current levels players are pricing in a rate cut next week.

·  The Rupiah government bond market continued to trade up on foreign buying, in line with the strengthening of Rupiah as it broke 11,500 support levels. The market opened lower but rebounded on London open on foreign buying especially in the 10y and 15y buckets. Trading volume halved on Thursday to IDR15.05 trillion from IDR34.3 trillion on the day before.

Best Regards,
CIMB Fixed Income Research
Corporate Banking, Treasury and Markets
Tel: +603 2261 8888 | Fax: +603 2261 8705
www.cimb.com

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