CIMB Daily Fixed Income Commentary - 13 May 2015

Market Roundup

• US Treasury yields edged lower along the curve by 2-4bps, supported by buying-on-dips interest after seeing the yields surged to the highest level since early December 2014. The Treasury Department sold $24 billion 3T on Tuesday, which saw solid bid-to-cover ratio at 3.34 times, compared to 3.25 times garnered in prior similar auction, while high yield was generated at 1.00%. Aside, indirect bidders tapped on 52.7% of the total sales, increased from 49.4% recorded earlier.
• Weaker Ringgit and crude oil price, and as global bonds continued to be sold-off as European bond markets opened, pressured Malaysian Government Securities on Tuesday. We noted 10-year US Treasuries rose another 3bps to over 2.30% in early Tuesday European trading, whilst MGS papers saw yields closing the day about 5bps higher along the bellies of the yield curve. Domestic players were still awaiting release of 1Q2015 Malaysian GDP data due Friday – consensus estimates heard at 5.4% yoy versus 5.8% previous quarter.
• As the Thai baht continued to weaken (USD/THB to its highest in past six years), its government bonds came under net selling pressure with yields up in excess of 10bps along the far end of the yield curve. USD/THB was spotted at 33.84 late Tuesday. Foreign players were already net sellers of Bt14.7 billion of THB denominated bonds last week and Bt2.6 billion on Monday. Players were concerned with the weakening outlook for the Thai economy this year, which brought BoT to unexpectedly slash interest rates in the past two MPC meetings. Foreign investors remained net sellers on Tuesday, but at a smaller amount of Bt838 million.
• IDR government bonds opened weaker, again on the back of weak global sentiment (fear on Greece and UST sell-off). Yields were up 10-15 bps in early hours.  However, the market was quiet after BI announced buy back auction.  Incoming bids for buyback auction is IDR5.897 trillion with BI accepting IDR3.0 trillion with the most award bid for FR70 (60% of the amount).
• Asian dollar credits saw less active trading Tuesday. Focus was turned towards the primary market. Also lifting the interest off the secondary market was less credit concerns, with Winsway expected to seek fresh capital, whilst awaiting a bondholders’ meeting slated for 15 May. However, seeing the weak UST performance overnight, HY sovereign bonds of Indonesia and Philippines weakened on the day, as well as their CDS levels. Still longer dated IG credits were dealt unchanged or steadier, including Petrol 45s with spreads about 7bps tighter.