CIMB MYR and USD Monthly Fixed Income Commentary for Apr 2015

Attached is the monthly market commentary for April 2015. We have included the near term outlook for the month of May 2015.

• In the short term horizon, sentiment along the Ringgit government bond market may be cautious as we think valuations are pretty high after recent rallies, whilst Bank Negara may be satisfied to hold the OPR at this week’s MPC meeting. This is despite a number of recent positives for Ringgit credits, namely the recent strength in Ringgit, support for global crude oil prices, mild inflation, recovery in Malaysian CDS prices, strong offerings of USD-denominated bonds and Sukuk issued by the Government of Malaysia and Petronas, and increased demand for GIIs after their inclusion into Barclay’s global aggregate index.
• Alongside the MPC meeting this week, we think the market will show more consolidation with bond yields marginally widening. Even though several positives are still abound for Malaysian bonds, higher UST yields will exert pressure onto the domestic market. Short- to medium-term resistance for the 10-year MGS is 3.90% and 3.98%.
• Continued weak sentiment will persist if Fed policymakers continue to be open to an earlier-than-expected hike in the Fed Funds Rate this year. Incoming US macroeconomic data will be closely watched, starting with the April non-farm payrolls (economist expect a much higher number compared with March’s lowly +126k). The 10-year Treasuries has broken our earlier resistance level of 2.03% and 2.15%. As this level is now breached the next resistance should be 2.25% and 2.30% and 2.40%.