CIMB Daily Fixed Income Commentary - 03 July 2014

Market Roundup

• US Treasuries weakened, led by the robust ADP Employment data of 281k recorded in the month of June, compared to 179k a month ago. Yield curve steepened, as the front end of the curve inched up by 1bp, while yields for medium and long term US Treasuries rose by 5-6bps.
• Malaysian government bond yields further inched down, led by foreign buying interest particularly along the front end and curve belly. Also, we noted decent interest on the 7-, 10- and 15-year GII. Meanwhile, daily transactions were pretty decent, amounted to RM3.7 billion.
• Thai government bonds weakened after the market reopened post Mid-Year holiday. We noted selling pressure along the curve belly despite foreign net buying continued flowing into the market, totalling Bt5.3 billion on Wednesday. IRS rates inched up on selected tenors, partially tracking the higher overnight Treasury yields.
• IDR denominated government bond market still continued its positive movement on Wednesday, with yields fell slightly by 3-5bps only. Overall, the market was pretty active, indicated by hefty trading volume of IDR10.80 trillion against IDR5.19 trillion recorded previous day. Benchmark series led the market, but we saw that some players also showed their appetite to shorter dated papers. Managed inflation rate and better trade balance data calmed the market currently, but players’ focus is still on the presidential election next week. The market may hover not far from previous level.
• Asian credits were seen with improved flows after Hong Kong’s public holiday a day ago. China credits were seen outperforming, as China Resources Feb’19 tightened by 2bps to 223bps, while newly issued China Construction Bank Jul’19 continued to tighten to 142bps, from the initial spread of 160bps.