CIMB MYR Weekly Fixed Income Commentary for 4 Aug 2014

Market Roundup

• Malaysian Government Securities (MGS) moved in tight range, as investors were away from desks during the short week. The bond market was seen recovering from the losses posted a week prior, which was triggered by profit taking activities ahead of the long weekend.
• Despite thinner flows throughout the short week, Ringgit denominated corporate bonds continued to strengthen thanks to decent buying interest, particularly along the AA3 rated segment. We noted that investors were better bidders along the front end of the curve.
• PCB ABSMTN Dec’15 was the only name traded over the week, which was dealt 11bps higher to close at 3.90%, with total trading volume of RM30 million.
• The US Treasury market was pretty volatile over the week, after the releases of 2Q14 GDP and nonfarm payroll data. The 2Q14 GDP showed a robust expansion of 4.0% QoQ, in contrast to the market expectation of 3.0% QoQ growth, hence market reacted negatively as players worried that interest rate may hike earlier than anticipated due to the strong growth number. However, July NFP figure which was released on Friday, came in a tad lower than consensus (209k vs 230k), eased the earlier concern and successfully attracted strong buying interest ahead of weekend.
• Asian dollar credits weakened, following the higher US Treasury yields after the release of the US second quarter GDP data. Aside, the dollar credit market was also pressured by the risk-aversion sentiment ahead of NFP number on Friday. Thus, credit spreads widened ahead of weekend, particularly along the lower rated segments, despite China manufacturing PMI rose to 51.7 in the month of July.