CIMB MYR and USD Weekly Fixed Income Commentary for 31 Oct 2014

Market Roundup

• Ringgit denominated government bonds consolidated at prior week’s levels, amid a cautious stance ahead of last week’s Federal Open Market Committee (FOMC) meeting (scheduled on Oct 29). However, Malaysian government bonds continued to move sideways post-FOMC meeting, as players did not react to the quick selloff in US Treasuries.
• Secondary trading of corporate bonds was upbeat, led by bargain-hunting interest and month-end portfolio rebalancing activities. In general, corporate bond yields grinded slightly lower amid a lack of sizeable fresh primary deals. Investors continued to show preference for short and medium term bonds, namely IJM Apr’19, Sime Darby Nov’16, Aman tranches (maturing 2017-2021), and BGSM tranches (maturing 2014-2024).
• Quiet week for Ringgit ABS, as investors shifted trading interest towards the corporate bond market. Total trading volume shrank drastically from RM305 million to RM40 million, while Cagamas MBS Dec’15 was the only paper traded over the week, closed 11bps higher at 3.86%.
• As widely expected, the Federal Reserve decided to stop the Quantitative Easing (QE) stimulus package, citing that the positive prospect on economic growth, particularly solid improvements in the job markets. Hence, we saw knee-jerk selling pressure along the front end of the US Treasury yield curve, which sent the yields by 10-11bps higher over the last week. Apart from that, the unexpected increase in BoJ’s annual asset purchases also improved global investors’ risk appetite, and eventually saw weakened US Treasuries and strengthened global equities.
• Asian dollar credits tightened amid higher UST yields, in conjunction with strong demand in new issues. We noted new issues traded firmer in secondary levels, as most of the primary deals were seen oversubscribed with heavy tenders.