CIMB Daily Fixed Income Commentary - 20 June 2014

Market Roundup

• US Treasuries weakened along the longer tenors with the 30T up 7bps to 3.47% after the 30-year TIPS auction generated higher than expected yield (1.116%). However, the auction drew a bid-to-cover ratio of 2.76 times, higher than the average of 2.66 times at the past 10 auctions.
• The US dollar continued to weaken after Fed comments provided little pointers to when the central bank will hike interest rates, even as the Fed tapered down another $10 billion of its monthly QE asset purchases. The Fed said there is no set plan on the progression how interest rates would rise in the coming 1-2 years, though Janet Yellen and co said growth has 'rebounded' from a bad winter season and raised chances of growth above long-run potential.
• MGS yields hovered at midweek levels, amid disappointing 3-year MGS auction results. However, trading volume spiked to RM3 billion well ahead of the release of CPI data on Friday. Market is anticipating the CPI figure to inch down by 0.1% to +3.3% in May.
• Thai government bonds were held unchanged despite foreign players supported the market with total net buying amount of Bt8.4 billion, which eventually surged the daily trading volume higher to Bt21 billion, compared to Bt12 billion recorded earlier. Again, market focus was on LB196A, which was traded unchanged at 3.13%.
• IDR denominated government bond market hovered at prior levels on Thursday after dovish statement made by the Fed after its two-day meeting regarding interest rate hike. Meantime, as expected, the Fed decided to taper its stimulus by another USD10 billion per month to USD35 billion per month. Along with strengthening in the bond market, rupiah also pared its losses that booked in the previous day. The market may remain sideline, as there is still no fresh drivers.
• Asian credit spreads tightened, after seeing the Fed to expect the longer-run rate to be staying around 3.75%, 25bps lower than prior estimate of 4.00%, pairing with the lower GDP forecast of 2.2% in the year of 2014. Meanwhile, the newly issued Noble perps edged up by 0.55pt to 100.72pts on Thursday, while Far East perps also surged higher by 0.33pt to 101.45pts.

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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