CIMB Daily Fixed Income Commentary - 3 February 2015

Good Morning,

Market Roundup

• US Treasuries weakened with yields surging 8-13bps along the bellies and far end of the curve. There was reversal of safe haven flows as hopes increased of some resolution between the new Greece government and the EU. Earlier in January, there were fears that the new government would backtrack on austerity measures placing the debt aid from the EU to Greece at stake.
• As crude oil prices rose, the dollar fell against the Euro currency. EUR/USD was spotted at 1.1464 this morning versus opening at low of 1.1280 this week. Brent crude rose to as high as $59 per barrel before hovering now around $57.90. Also lifting the Euro were hopes of resolution between the new Greece government and Euro Zone partners. New Finance Minister Yanis Varoufakis was heard saying the government would no longer call on creditors to write off part of Greece’s €315 billion debt and would propose debt swaps, thus maintaining Greece on the debt program.
• End-month trading rebalancing boosted volume traded and gains along the Malaysian Government Bond market before the market goes off on long holiday weekend. Volume was heavier along benchmark papers with yields seen declining up to 7bps last Friday.
• Thai bonds came under moderate pressure with foreigners net selling a pretty small Bt316 million of bonds on Tuesday. Meanwhile, IRS rates moved sideways. Longer tenor swap rates rose 2-3bps though the 5-year rates came down 5bps on the day.
• IDR government bonds ended Tuesday with the yields down by 5-15 bps across the curve. The market kept trading up even though the government was holding the auction. We saw bidding interests from securities houses in the market before the auction opened. The demand for auction was still strong, with the government receiving IDR40.2 trillion of incoming bids with the most bids concentrated on FR71 (15-year bonds). The government accepted IDR16 trillion, upsized from initial target issuance IDR 12 trillion with aggressive yield was won at 6.96% for the 15-year paper. FR71 accounted for 35.6% of total issuance and bid to cover ratio was 3.02x.
• On Tuesday, Asian dollar credits saw a lack of interest as focus was on pipeline primary deals. IG spreads were mostly unchanged and saw little boost from overnight rally along the US equities markets. Two new offerings came from China-based Shimao Properties and Indonesia’s telecom company Tower Bersama.