CIMB Daily Fixed Income Commentary - 11 August 2014

Market Roundup

• US Treasuries retreated marginally, after posted decent gains over the week on the back of safety assets demand. We expect to see more profit taking activities in the short term, after the Ukrainian rebel showed willingness for ceasefire over the weekend.
• Ringgit denominated government bond market remained upbeat and continued to strengthen on Friday. Daily volume fell a tad lower from RM3.6 billion to RM3.1 billion, while market focus was on the maturing MGS Aug’14, which dealt 8bps lower to 3.20% and printed RM1.3 billion throughout the day. Meanwhile, IRS rates inched down on the front end of the curve on better receiving interest.
• Thai government bond market was seen with thinner flows ahead of weekend, totalling Bt9.8 billion, in contrast to Bt14.0 billion a day before. Despite the thinner transactions, government bond yields dipped by 3-5bps along the curve belly on the back of positive sentiment. LB196A was heavily traded amounted to Bt4.4 billion, while yield fell by 7bps to close at 2.97%. Aside, 5- and 10-year IRS rates dropped by 3-5bps, partially in line with the sovereign yields’ movement.
• IDR denominated government bond market was still on negative mode on Thursday. However, transactions were seen quite active with total trading volume of IDR11.50 trillion, especially along longer dated benchmark series (10-year FR70 and 20-year FR68). Foreign players showed selling interest on the day, and pressured the market down. Players were seen favoring safe heaven assets such as US Treasury. Meantime, rupiah also weakened throughout the day. There are no fresh drivers currently and the market may still continue trending but yields may be hovering not far from previous levels.
• Asian credits continued to show weakness, as investors were seen better selling on Friday led by pressured sentiment. The iTraxx Asia ex-Japan IG Index further widened by 3bps to around 115bps, from 108bps earlier this week. Olam Feb’20 which was issued recently was traded 19bps wider from the issue spread of 295bps and closed at 314bps.