CIMB Daily Fixed Income Commentary - 15 August 2014

Market Roundup

• US Treasury yield curve flattened, following the strong demand seen in the 30-year bond auction held on Thursday. 10T and 30T yield fell substantially by 15 and 18bps lower within a month, boosted by heavier demand in safe-haven assets driven by Ukraine geopolitical tension.
• On Thursday, Bank Negara Malaysia sold RM3.5 billion worth of the 7-year MGS in a reopening auction. Demand was decent with the bid-cover coming in exactly at 2.00 times. However, in a sign of the current cautious market, the average yield was recorded at 3.803%, or within 5bps higher than what we think the market was expecting before tender.
• Thai government bonds closed mixed but rangebound. There was little support from overseas investors as they net sold Bt1.12 billion of bonds on Thursday. However, the Baht was firmer, seen hovering near 31.85 late Thursday from 32.00 the day before. Players are keenly awaiting the 2Q2014 GDP release next week (due 18 August), with expectation of a stronger growth pace of +0.3% yoy in consensus expectation against the 0.6% contraction the previous quarter.
• IDR denominated government bond market still moved in narrow range on Thursday, but closed with lower yields. On the day, Bank Indonesia decided to maintain the benchmark rate at the same level of 7.50% as all economists had anticipated. Meantime, current account data also released on the same day, booked a deficit totalling USD9.1 billion or about 4.27% of GDP in the second quarter this year. In general, the market was quite with volume of IDR5 trillion from around IDR5.4 trillion in the previous day.
• Asian dollar credits saw mixed trading on Thursday with little buying impetus noted amid the release of weaker than expected global economic data. Overnight saw the release of weaker than expected US retail sales data whilst we received Germany’s 2Q2014 GDP which showed a contraction of 0.2% qoq (against -0.1% consensus). Also, Japan’s GDP shrank by an annualized 6.8% qoq in 2Q2014.