CIMB Daily Fixed Income Commentary - 22 January 2015

Good Morning,

Market Roundup

• US Treasury yield curve ended steeper on Wednesday, as players took profit on prior rally and stayed on the sidelines ahead of ECB meeting. The 10-year benchmark yield rose sharply by about 9bps in the afternoon session towards the 1.87% level.
• Malaysian government bonds opened on weak footing amid negative sentiment from the previous day’s announcement of higher fiscal deficit target for 2015 and Fitch Ratings comments that it may likely than not downgrade Malaysia’s A3 sovereign rating. The weak ringgit added to the pressure as the USD/MYR rose above 3.6000.
• The baht ended at a firmer 32.595 versus 32.72 the day before, whilst Thai government bonds saw some support from offshore. Foreign investors were net buyers of Bt406 million of Thai bonds Wednesday. The Thai market is receiving some support especially along the shorter tenors after yields rose 15bps along the 3-year bonds last week. However, we warn against continued buying along the 3-year govvies below 3.25% in lieu of the MPC meeting 28 January.
• Indonesia government bonds bull flattened - medium to long end tenures showing yields declining up to 16bps - as offshore inflows kept coming in the morning session. Early day bids were especially on FR70 and FR68, which were auctioned the day prior.
• Asian dollar bonds were boosted after overnight gains along the US Treasuries market and ahead of the ECB meeting. Sentiment was buoyed amid anticipated yields declines as the ECB was expected to announce fresh stimulus measures including an anticipated asset purchases program.