CIMB Daily Fixed Income Commentary - 30 April 2015

Market Roundup

• US Treasuries extended losses ahead of the FOMC outcome during mid-week, sending the yields to the highest levels for the month of April. As widely expected, the FOMC kept the rates unchanged, while pointing that the recent slower growth was due to the winter season and transitory factors. However, the policymakers left the door open for rate hike, as they expected that the economic growth will expand moderately, and inflation to rise gradually toward the 2% target on a medium term time frame.
• Malaysian govvies were under selling pressure in the morning session, as the sentiment negatively affected by the sell-off activities in overnight UST market. However, market recovered gradually throughout the day and eventually ended almost unchanged from the prior day close.
• Thai government bond yield curve ended flatter, reacting to the surprise interest rate cut conducted by BoT during mid-week. On the other hand, total transaction increased substantially from Bt22.6 billion to Bt48.8 billion, led by LB197A and LB21DA, which contributed combined volume of Bt27.8 billion throughout the day. The MPC decided to lower the policy rate by 25bps to 1.50%, as the statement revealed that majority of the members were concerned by the slower-than-expected economic recovery, while the growth trajectory may be dragged further by slowdown in China and other major trading partners. On top of that, the MPC viewed that the lower policy rate can “ease the THB’s recent appreciation, as well as anchoring the inflation expectation at an appropriate level”.
• Indonesia government bond market rebounded on Wednesday, backed by foreign buying interest particularly in benchmark series. FR70, the 10-year benchmark was still the most actively traded bond. Meanwhile, we saw strong demand on FR70 for last few days from end clients, which eventually spurred buying support to other segment of the curve. Aside, trading volume jumped to IDR 14.57 trillion.
• For Asian credits, market was seen well absorbing the consistent supplies from primary market, while secondary market was pretty muted, as investors awaited for the FOMC outcome this week.