CIMB Daily Fixed Income Commentary - 15 January 2015

Good Morning,

Market Roundup

• Weaker-than-expected December retail sales and shaky equity markets continued to pressure the US Treasury yields lower during mid-week. Market was disappointed with the retail sales figure, which contracted by 0.9%, against 0.1% decline of consensus estimate. The 10T yield dropped sharply to test 1.80%, before eventually rose and closed higher at 1.86%.
• Ringgit denominated government bonds opened on very firm footing but pared gains later in the day due to profit taking pressure. The boost from both domestic and foreign players was on medium to longer dated papers. As the 7-10 year dated papers saw decline of as much as 6bps during the morning session.
• Thai government bonds closed steady with gains noted along the longer dated papers. Support was seen from offshore as foreign investors were net buyers of Bt379 billion of THB denominated bonds on Wednesday. Meantime, the Baht was steadier as the USD/THB pair was spotted around 32.79 late Wednesday from 32.81 the day before. Amongst others, low inflationary pressure (but expectation of improved growth outlook in the medium term horizon), less supply concerns, and vis-à-vis less comparative risk against peers Malaysia and Indonesia, boosted sentiment on Wednesday.
• IDR denominated government bonds weakened on profit taking pressure with most activity centred on the medium to long end buckets. Benchmark series dominated the market, led by FR71 (15-year paper) followed by FR70 (10 year) and FR68 (20 year). Not too much happened elsewhere, but newly issued 1.5 year PBS8 was actively quoted in the market. Total volume was IDR12.02 trillion, higher than IDR10.74 trillion previously recorded.
• Asian dollar bonds continued to weaken amid the poor global sentiment. The day when the World Bank cut its global outlook was the day after Brent fell below US$50 per barrel. Meantime, credit worries also pressured on sentiment, as Kaisa’s spreads widened on the heels of Moody’s cutting its company rating from Caa3 to Ca1, or one level above junk.