CIMB Daily Fixed Income Commentary - 12 May 2015

Market Roundup

• US Treasuries weakened as players reversed the small rally after the release of the weaker-than-expected non-farm payrolls (we think slightly weaker than expected NFP didn’t reflect firm trajectory of the US economy). Higher Euro Zone yields also impacted sentiment along the UST market, prolonging the weakness in the prior weeks, and pushing UST yields to their highest since early December 2014.
• USD firmed against the EUR, seen at 1.1147 this morning versus 1.1214 closing last week. Cautious tone along the EUR was seen ahead of loan repayment due by Greece this week to the IMF. However, GBP was firm, as it continued to be supported after last week’s general elections. GBP/USD was at 1.5574 this morning. But we think some signs of weaker crude oil may support USD today. Brent was at $64.91 per barrel currently versus 65.39 last week.
• USD/MYR was at 3.6015 this morning, weaker against the USD versus 3.5960 close last week. It was only briefly firmer below 3.6000 after print out of firm Malaysia IPI numbers yesterday, which came at +6.9% yoy in March versus +4.5% consensus.
• There wasn’t’ a sell-off in the Ringgit bond market as the market opened this week, with yields down 3bps along the bellies of the yield curve. Aside, the Ringgit maintained strength to hover near 3.6000 late Monday after closing last week at 3.5960. Overnight gains along the US Treasuries market aided sentiment on local bonds. Meantime, volume traded for the Ringgit govvies was pretty thin at just over RM1.0 billion.
• Domestic players bought back Thai government bonds, seeing overnight gains along the US Treasuries market (on the heels of weaker-than-expected April jobs report), though foreign players remain net sellers (net sell of Bt2.8 billion on Monday), with the THB remaining weak to hover near 33.69 late Monday (versus close of 33.508 last week). Total outright volume was heavy at Bt53.0 billion Monday versus Bt21.9 billion last Friday.
• Indonesian government bonds opened stronger on the back of sentiment from China’s rate cut.  Yields fell by 5-10bps in the morning session. However, the market saw hevier selling post auction result in which government upsized the issue size. The selling pressure eventually erased the morning’s gains particularly on benchmark series. Incoming bids for the auction was IDR13.3 trillion. The government upsized the offer to IDR11.8 trillion from IDR8 trillion initial target. Trading volume reached IDR13.57 trillion.
• Asian credits opened the week on firmer footing, aided by better risk appetite which was aided by firm UST movement overnight and rate cut in China. However, there was a mild hit on sentiment on default news, by China’s Winsway Enterprises, which was reported to have failed to make coupon payment (of $13.2 million) on its US dollar notes maturing 2016. Nevertheless, Winsway bonds were supported, as bondholders gave leeway for a ‘standstill’ agreement to end-month