CIMB Daily Fixed Income Commentary - 28 August 2014

Market Roundup

• US Treasury yield curve ended flatter, as the curve belly to long end yields were pressured lower by 2-6bps. We view that the buying activities were spurred by the better buyers sentiment spilled from the Euro region, after the ECB president Mario Draghi highlighted that the central bank will probably implement further easing measures to fight the falling inflation. Week-on-week, German sovereign yields traded 2-8bps lower along the curve.
• Short and medium term MGS benchmarks posted gains, on the back of decent foreign buying interest, particularly on the 5- and 10-year papers. Meanwhile, we noted that bills market was pretty actively traded with approximately RM6 billion transacted, following the strengthened Ringgit. Elsewhere, WI for the 10-year GII was last quoted at 4.145/135%.
• Thai government bond market was noted with heavier flows, as trading volume surged drastically to Bt28.2 billion, in contrast to Bt7.2 billion garnered a day ago, mainly aided by the LB236A reopening auction, which contributed Bt15 billion throughout the day. Meanwhile, Thai sovereign curve was held pretty unchanged, with exception that the 10-year yield rose substantially by 9bps to 3.70%.
• IDR denominated government bond market moved marginally and closed not far from previous levels. We still did not see any substantial sentiments from domestic side particularly. However, trading reached hefty volume amounting IDR18.37 trillion compared with previous day of IDR9.52 trillion. We noticed that some players showed their appetite in trading shorter dated series and off-the-run papers.
• New Asian dollar issues were in good demand, as Link REIT issued its 10-year paper at 130bps, 15bps tighter than initial guide price. Aside, China Orient priced the 5- and 10-year papers at 225 and 275bps, equivalent to 30 and 25bps tighter from initial guide price.