CIMB MYR and USD Weekly Fixed Income Commentary for 24 Apr 2015

Attached is the weekly market highlights for Apr 24, 2015:

Market Roundup

• Malaysian government bonds closed firmer for the week ended Apr 24, guided by bullish MYR amid higher crude oil prices. USD/MYR dipped from 3.6182 recorded a week ago, to 3.5835 late Friday, while Brent crude oil rose further from $63.45/bbl to $65.46/bbl during the same period. In addition, the market also reacted positively to comments made by Bank Negara Malaysia Governor Zeti at the InvestMalaysia conference. The Governor doubted the basis of possible downgrade on Malaysia’s credit rating, as the country’s fundamental remains strong. Amongst others, the 5-year MGS fell 4bps to 3.61% and the 10-year MGS fell 3bps to 3.85%.
• Secondary trading in the Ringgit corporate bond market remained upbeat, as investors continued to seek higher yields amid the lower yielding environment. Focus was slanted towards lower rated or longer dated bonds, which included SEB Jul’29, BGSM Jun’24, Malakoff Power Dec’31 and Anih Nov’26. We think that there is still room for gains in corporate bonds in the near term period.
• US Treasuries pared gains on the back of mixed economic data, amid thin profit taking activities. Demand for safe-haven assets also softened, as stock markets posted gains during the week, while market downplayed the concerns on Greek debt issue, after seeing the central bank ordered the government-linked entities to channel liquidity to itself. We think players should be wary of higher US Treasury yields in the short term horizon. Even with continued mixed-to-weaker economic data, onslaught of low yields in the Euro Zone, Japan and China, as well as resurfacing of Greece’s Euro exit fears, UST yields are unable to break support levels. For instance, the 10T was unable to sustain below 1.85% for too long. However, we also think there are very firm resistance levels up there, which means our view is for players to pick up UST ‘on dips’. Up to one-month horizon, we see 10T resistance at 2.03% and next towards 2.15% and 2.25%.
• Asian dollar credits were well supported, despite traded on a softer tone heading towards weekend, driven by weaker China’s Manufacturing PMI April preliminary reading. On top of that, sentiment was seen pretty steady, as default cases of Kaisa and Baoding Tianwei made little impact to the market.