CIMB Daily Fixed Income Commentary - 04 June 2014

Market Roundup

• US Treasuries continued to reverse with yields rising 7bps along the far end of the curve as players turned cautious after the recent rally.
• We still await 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 – to aid the Euro Zone economy.
• The EUR/USD pair is seen hovering near 1.3621 this morning versus 1.3606 overnight and 1.3611 last Friday. Aside, the Euro Zone inflation report showed price rose 0.5% in May from +0.7% in April.
• Malaysian Government Bonds saw net buying interest during the morning session particularly off-the-run papers with maturity in 2017. However, interest subsided by the afternoon session, as we noted selling pressure along the 7-year MGS (after brief bids in the morning), the 10-year MGS and 15-year MGS. Heavily transacted was the 7-year MGS with RM194 million flows and ending unchanged for the day at 3.94%.
• Foreign shareholding in domestic MGS fell to RM135.5 billion at end April 2014 from RM140.8 billion the month before, coinciding with larger RM16 billion maturity of MGS Apr’14. Their share of total outstanding MGS (excluding GII) rose to 44.07% in April from 44.06% in March.
• Thai government bonds yields during the morning session seeing the weaker US Treasuries performance overnight. However, domestic demand later in the day resulted in the market seeing marginal gains for the day. This week we await the 10-year bond auction with size of Bt16 billion and expect range 3.67/62%.
• IDR denominated government bonds rebounded as players showed better buying interest. Trading activities were still heavy, about IDR13.48 trillion changing hands, up IDR7.69 trillion the day before. We noted that 5-year FR69 and 15-year FR71 were traded significantly around IDR1.77 trillion and IDR1.47 trillion respectively. Players also showed their interest to several off-the-run series on the day such as FR59 and SPN series.
• Asian dollar credits saw off marginal strength but flows were not quite heavy, as investors noted the China PMI numbers while awaiting the US non-farm payrolls and ECB meeting still. The HSBC China manufacturing PMI was released at reading of 49.4 against earlier consensus 49.7 reading, which did not meet estimates but seemed to alleviate concerns on the Chinese economy and spurring interest into both Chinese IG and HY dollar papers.
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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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