CIMB Daily Fixed Income Commentary - 03 June 2014

Market Roundup

• US Treasurys registered further losses after the Institute for Supply Management reported its manufacturing index with reading of 55.4 in the month of May versus consensus of 55.5 and 54.9 in April.
• The US dollar strengthened further versus the Euro, as expectations rose the ECB will added monetary stimulus this week at its policy meeting. Germany’s inflation number for May missed expectations with the EU-harmonized annual reading falling to +0.6% from 1.1% in April.
• Malaysian government bonds ended sideways with selective interest along the 3-7 year bonds. Meantime, IRS rates ended the day rangebound with muted participation as players were sidelined awaiting for fresh leads. This week, sentiment along the global markets will be guided by the May US non-farm payrolls and the ECB policy meeting. Consensus for the NFP is a smaller 215k increase in May versus +288k the month before. Meanwhile, ECB policymakers may announce further monetary stimulus – including in the form of bond purchases – or pumping cash into the ailing Euro Zone economy. Meantime, we awai Malaysia’s exports numbers. Consensus shows a higher 9.1% yoy growth in April versus +8.4% in March.
• Thai government bonds posted gains especially along the bellies and far end of the curve, but mostly due to buying on dips, on our opinion, after yields surged in the last two weeks. The yield curve flattened as longer tenor yields fell 6-7bps.  Still, along the front end of the curve, the 3-year LB176A was heavily traded as it fell marginally to 2.44% (-1bp).
• IDR denominated government bonds ended mixed. The inflation data was reported at +0.16% MoM or 7.32% YoY, or marginally higher from consensus but still relatively low. In addition, the trade balance data in April was released the same day, showing a large deficit of USD1.9 billion, much higher than earlier estimation of USD178 million. The market went south after the announcement and the rupiah touched above 11,700. However, we still there were some inflows amidst the weakening, restricting deeper losses on the day.
• Trades involving Asian dollar credits were thin on Monday, as Hong Kong was closed whilst in the rest of the region investors were awaiting fresh market drivers, namely big US jobs and manufacturing data, China HSBC PMI and the ECB meeting.
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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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