CIMB Daily Fixed Income Commentary - 14 August 2014

Market Roundup

• US Treasuries strengthened amid release of weaker-than-expected retail sales numbers and was supported by firm demand at the auction of 10-year notes.
• The GBP firmed versus the USD on remarks by BOE governor Mark Carney that the central bank is on course to hike its policy rate next year. In the BOE inflation report, Carney also highlighted uncertainties in growth due to weak productivity and income gains.
• Elsewhere, the USD was rangebound as it was dampened by weaker-than-expected retail sales numbers. Advance retail sales showed zero growth in July on a month-on-month basis against +0.4% mom consensus and 0.4% mom growth the prior month.
• It was a muted Malaysian government bond market midweek, as trading flows declined to RM1.6 billion on Wednesday. Furthermore, MGS benchmark papers were left pretty unchanged amid the quiet market. While trading activities subdued, market focus was on off-the-run MGS Sep’16, which garnered decent buying activities and pressured the yield lower by 2bps to close at 3.30%.
• Thai government bonds were pretty actively transacted, aided by auctions held on midweek after the market reopened from long weekend. Daily volume advanced to Bt26.2 billion, compared to Bt9.8 billion recorded on last Friday. Meanwhile, the benchmark yields surged a tad higher by 2-4bps, tracking higher US Treasury yields amid lacking of major market movers.

·  IDR denominated government bonds still moved in narrow ranges amid no significant fresh catalysts. Players tended to take less aggressive stance recently, accompanied by relatively thin volume. In general, the market booked less than average normal volume totaling around IDR5.4 trillion on Wednesday, but slightly heavier than previous day of IDR4 trillion only. On Thursday, Bank Indonesia will decide the BI rate. Economists expect that the reference rate will be kept at the same at of 7.50%.

• Asian credit spreads further tightened, as the market is well supported by better bidding interest during midweek. Chinese names posted gains alongside the positive industrial output number released, as Sinopec Apr’24 dealt 4bps tighter to 140bps, while China Resources Feb’19 tightened by 2bps to 224bps.