CIMB MYR Weekly Fixed Income Commentary for 27 Jun 2014

Attached is the weekly market highlights for Jun 27, 2014:

Market Roundup

• Malaysia’s sovereign yield curve flattened as shorter term bonds rose 2-4bps week-on-week. Meanwhile, average daily trading volume declined from RM1.8 billion to RM1.6 billion.
• On the flip side, we saw active transactions in corporate bonds over the week. The market was going through consolidation, while focus was on higher quality papers along the AAA segment, which included Aman, PLUS and Nur Power tranches. Aside, we also noted decent trading interest on short term bonds, with maturity less than 3 years. We suspect the high trading volumes were due to quarterly portfolio rebalancing pairing with cautious sentiment ahead of the upcoming MPC meeting.
• Ringgit ABS market was quiet as only RM40 million worth of papers were transacted over the week, while trading interest concentrated was on Cagamas MBS Aug’20, which contributed half of the weekly volume.
• IRS rates were held pretty firm on week-to-week basis, despite the rally in US Treasuries. Aside, 5-year onshore and offshore spread stood firm around 9bps ahead of weekend, while 3-month KLIBOR fixing ended 1bp higher to 3.54%.
• US Treasury yield curve flattened as the longer end rallied, after the market noted the neutral statement made by Federal Reserve in the latest FOMC meeting. Meanwhile, we saw thinner bidding interest at Treasury auctions of shorter dated papers (2T, 5T and 7T) held over the week, as bid-to-cover ratios were a tad lower in general. In addition, indirect bidders showed stronger buying interest in recent auctions, compared to the prior auctions.
• Asian dollar credits were seen moving sideways, as an early rally resulted in quick profit-taking activities by midweek. Newer issues remained upbeat, as AmBank maturing 2019 tightened from issue spread of 150bps to 137bps, while China Hongqiao was traded higher to 103.28pts ahead of weekend.