CIMB Daily Fixed Income Commentary - 17 September 2014

Market Roundup

• US Treasury yields moved rangebound as we head closer to the FOMC meeting. Federal Reserve’s FOMC members have sounded increasingly sounding more neutral in terms of policy direction. With the US economy showing firm rebound and pace of the jobs market hinting of future consolidation, we think the Fed will turn towards tightening interest rates by mid next year.
• The GBP weakened slightly as caution increased before the Scotland vote on independence. GBP/USD was around 1.6193 early Tuesday against 1.6276 the day before. Caution also took hold ahead of the August UK inflation report with expectation of lower number than the +1.6% increase recorded in July.
• Malaysian government bonds closed sideways on Monday. Volume traded was pretty thin at about RM1.1 billion on the day. Sentiment remained guarded ahead of this week’s MPC meeting and public holiday on Tuesday. Benchmark MGS trading was slanted along the short dated 3-year MGS, which closed unchanged at 3.59%, and the 10-year MGS which grinded 1bp higher to 4.00%. Elsewhere, selected GII papers also saw thin trading volume, with yields realigning upwards, ahead of the MPC.
• Thai government bonds closed mildly firmer on Tuesday with yields down 1-2bps. Bank of Thailand MPC meeting is slated for 17 September. We do not expect BoT to nudge the policy rate higher as the economy is at the starting point of a slow rebound whilst at the same time the lack of long term outlook on the politics side remains a factor.
• IDR denominated government bonds still continued its negative trend. However, yields marginally moved, increasing by up to around 3bps throughout the day. Rupiah also kept its weakening, almost touching 12,000. Players concerned whether the Fed will indicate clearly regarding interest rate hike in the near future at its meeting on Wednesday. Players also focused on auction held by the government on the day. However, trading volume booked large amount about IDR10.74 trillion, relatively unchanged than previous day.
• Asian dollar bonds closed rangebound on thin trading amid cautious sentiment on the heels of weak Chinese economic data releases, while the Hong Kong market was closed during the morning session due to typhoon. Sentiment also remained cautious ahead of this week’s FOMC meeting and anticipated congestion in pipeline primary deals.