CIMB Daily Fixed Income Commentary - 18 August 2014

Market Roundup

• US Treasuries remained upbeat amid escalated tension in Ukraine, after Russian military vehicles were claimed destroyed by Ukrainian army at the border, while Friday economic data releases made little impact to the market. Long dated 10T and 30T yields further declined by 6bps each to close at 2.34% and 3.13%.
• Malaysian government bonds showed weaknesses ahead of weekend, amid the cautious trading tone due to the higher-than-expected 2Q2014 GDP figure of 6.4%, compared to 5.8% estimated by economists. Players were concerned that the robust GDP number may provide support for rate hike decision in incoming MPC meeting in September. Hence, we saw better selling activities on Friday, pressuring the yields higher by 1-2bps along the MGS benchmarks. Aside, Ringgit IRS surged a tad higher, tracking the arising sovereign yields.
• Muted Thai government bond market on Friday, as daily transactions fell drastically to Bt3.2 billion, from Bt18.4 billion recorded in prior day. Elsewhere, sovereign yields was left mainly unchanged, as players were noted staying sidelined well ahead of 2Q2014 GDP release. However, Thai IRS curve shifted lower, on the back of lower overnight US Treasury yields.
• IDR denominated government bond market still moved insignificantly. As foreign players were seen showing their net selling interest, the bond market ended with slightly higher yields by around 2-4bps. Meantime, similar with previous days in the week, trading activities was very thin with volume of IDR3.76 trillion only and declined substantially compared with previous day of IDR5 trillion. Players were seen awaiting auction in next week.
• Asian dollar credits were well bidded ahead of weekend, following the positive buying interest in US sovereign bonds. Newly issued Shanghai Electric Aug’19 was traded further tighter to 113bps, 27bps away from the reoffer yield of 140bps. Meanwhile, China Metallurgical was heard planning to meet investors in Hong Kong and Singapore on Monday for new issuance.