CIMB Daily Fixed Income Commentary - 30 January 2015

Good Morning,

Market Roundup

• US Treasuries reversed early gains with the Treasury Department holding two government bond auctions on the day. Earlier gains were partly due to yield hunting as investors moved away from the low or negative yields in Europe and Japan. Players also took profit after the statement from the FOMC earlier this week, which had driven players into the UST on remarks of weak inflationary pressure.
• AUD/USD fell as traders took heed of speculation that RBA might ease monetary policy next week coming on the heels of measures by other central banks recently including MAS and SNB. However, our preference is a no change to interest rates given the higher inflation reading release this week. RBA meets next Tuesday.
• Malaysian government bonds closed mixed on decent volume whilst there was auction of the next 3-year benchmark (MGS Oct’17). After recent the recent rally, and ahead of next week’s short trading week, as well as post (neutral) MPC, there was little else to move the market on Thursday.
• Post January MPC meeting, Thailand government bonds closed on sideways direction Thursday. However, we saw shorter and longer tenor papers coming under net buying interest, with expectations remaining that BoT would consider cutting rates in later MPC meetings this year. Again, there was little support from offshore as foreign investors were net sellers of Thai bonds to the tune of Bt845 million Thursday.
• Looking at the IDR government bond market, the yield curve ended up a tad lower with thin trading volume. We saw buying interest along the 5-, 10- and 15-year tenors from a few foreign names. However, it was hard to see sellers with decent size recently. We think players expect that inflation will be lower and thus provide scope for BI to cut the policy rate.
• Asian dollar bonds were mostly dealt weaker on Thursday. Sentiment was not helped after the Fed was pretty vague in their language, resulting in some investors thinking the Fed may pull a rate hike sooner than expected (despite US Treasuries rallying overnight).