CIMB Daily Fixed Income Commentary - 14 May 2015

Market Roundup

• On Wednesday, US Treasuries weakened again, with yields higher along the bellies and far end of the curve, pressured by rising German 10-year bunds and ahead of $16 billion 30-year bond auction Thursday. However, rise in UST yields were pared amid by firm auction of the 10T and weaker-than-anticipated retail sales numbers. US advance retail sales showed zero growth month-on-month in April against 0.2% consensus. Retails sales less auto rose 0.1% mom against 0.5% consensus.
• EUR/USD weakened amid the release of weaker-than-expected US retail sales numbers, with the US dollar index down to 93.617 Wednesday from 94.534 the day before.
• A lack of fresh market drivers and players still awaiting this week’s 1Q2015 GDP and current account data releases, as well as ahead of the following day’s 3-year GII auction, meant Malaysian government bonds ended sideways on thinner trading volume. There was also little direction from overnight UST trading which saw yields coming down marginally after the past couple of week’s sell-off.
• Thai government bonds closed marginally firmer with yields down 1-2bps along the front and middle of the yield curve. We think support mostly came from local players as foreign investors were net sellers of Bt3.7 billion of Thai bonds Wednesday. Aside, IRS players were risk averse as they focused on the shorter end of the curve, which steepened on the day.
• IDR government bonds rallied as BI held a buyback auction Wednesday morning, followed by firm foreign buying interest later in the day. On the buyback auction, BI absorbed IDR2.67 trillion of all benchmark bonds, whilst receiving incoming offer of IDR5.36 trillion. Strong buying flows were seen after the result announcement, sending yields with strong profit taking action seen near the closing hour. Trading volume was big amounting IDR18.28 trillion.
• Asian dollar credits saw a steadier session on Wednesday, helped by firm UST market overnight with less volatility. However, we think trading activity was lighter with buying interest mainly slanted along newer issued bonds.