CIMB Daily Fixed Income Commentary - 18 September 2014

Market Roundup

·        US Treasury yields surged by 1-5bps along the curve, guided by the less-dovish tone from the Fed president Janet Yellen during the FOMC meeting. Moreover, the Fed as widely expected, further reduced another $10 billion to $15 billion for its monthly bond purchases. As a result, the 5T closed at 1.83%, 29bps higher compared to a month ago.
·        MGS benchmarks dealt mixed amid quiet market, as trading volume further declined from RM1.1 billion to RM671 million. Aside, August CPI came slightly higher at 3.3%, in comparison of 3.2% projected by economists. However, we think that this may make little impact to the market activities at this juncture, and expect another quiet trading day on Thursday, as players are likely to remain sideline before MPC meeting.
·        The policy makers as expectedly kept the interest rate unchanged at 2.00%, cited that the low interest rate is needed to support the early stage of recovery in economic growth. Apart from that, THB denominated government bonds extended gains on the back of thin net buying activities, as yields fell further by 1-3bps along the curve. Meantime, total transactions shrank from Bt8.1 billion to Bt5.4 billion.
·        IDR denominated government bonds ended with lower yields. Some players showed net buying interest after significant losses in more than a week, and after the government awarded only IDR10 trillion whilst total demand was significant a day before. Quite high demand, which provide support to the market. However, players still awaited the Fed meeting result. Thus, yields moved marginally.  
·        Asian dollar credits traded in mixed direction during midweek, as market generally supported by the news of PBoC’s easing measure of channelling $81 billion worth of liquidity into the five domestic banks. However, we saw thin flows of transaction well ahead of FOMC meeting, amid cautious sentiment.