CIMB Daily Fixed Income Commentary - 24 July 2014

Market Roundup

• US Treasury yields ended relatively unchanged amid lacking of fresh market guidance on Wednesday. 10T and 30T yields inched up by 1bp to close at 2.47% and 3.26% respectively.
• While MGS benchmarks were moving in sideways, players showed better interest in GII May’24 and Dec’28, which were seen traded pretty firm at Tuesday’s levels. Aside, GII Jul’15 was traded 17bps lower and closed at 3.21%. We think that the government bonds will continue to be traded in softer tone ahead of Raya festive, as players may choose to realize and lock their profits garnered earlier.
• THB denominated government bonds moved in mixed directions as buying interest was capped by the recent rally. However, trading activities remained pretty decent at Bt19 billion on Wednesday. While market was noted with thin selling pressure, long dated LB27DA and ILB283A were well bidded and closed 4 and 6bps lower respectively. We reckon that investors may turn to profit taking in the near term amid lacking of major positive catalysts. Apart from that, Thai IRS curve stood firm at previous day’s levels.
• IDR denominated government bond market firmed on Wednesday. The market had experienced weakening after the candidate Prabowo stated rejection on presidential election result by General Elections Commission (KPU) a day before. Nonetheless, the market moved positively after KPU officially announced that Jokowi and his running mate Jusuf Kalla won the election on Wednesday, confirmed most of credible quick count results. Since players had anticipated the official result, the strengthening was not significant, as yields only dropped by 3-6bps. Overall, the market still recorded a large volume amounting IDR18.17 trillion on the day, changed marginally from prior day. Most of transactions focused on benchmark series especially 20-year FR68 and 10-year FR70.
• Asian credits strengthened, as market continued to show buying interest in anticipating improvement in July preliminary HSBC China Manufacturing PMI reading, compared to a month ago. New issue Future Land Jul’19 edged up by 0.19pt to close at 98.51pts, while Bangkok Bank papers maturing 2018 and 2023 were quoted further tighter by 1-3bps on midweek.

We would like to wish our readers Selamat Hari Raya Idul-Fitri.
CIMB Fixed Income Research will not publish commentaries during the period 28-Jul-2014 to 1-Aug-2014. We will recommence our usual publications from 4-Aug-2014.