CIMB MYR and USD Weekly Fixed Income Commentary for 08 May 2015

Attached is the weekly market highlights for May 08, 2015:

Market Roundup

• The weakness in global bonds impacted the Ringgit government bonds by sending the yields of medium to longer papers up 5-8bps. Moreover, players were also cautious going into last week’s Bank Negara Malaysia Monetary Policy Committee (MPC) meeting.
• This week, we expect the MGS yields to show mild increases (whilst we expect UST yields to also rise). This week’s resistance for the 10-year MGS is 3.98%. Meantime, we await for the new 3-year GII auction, which is expected to be announced this week.
• As for Ringgit corporate bonds, we noted that despite the weakness in the MGS segment, the market was supported. Selected credit spreads remained a tad wide following the last couple of month’s rally in the MGS segment, thereby still supporting the net buying interest for Ringgit credits. Papers seeing demand include those of UEMS, BGSM, HLBank, as well as Cagamas, and PLUS along the higher grade segment.
• US Treasuries mildly strengthened week-on-week, supported by the NFP report. The April non-farm payrolls was just shy of consensus at 223k new jobs added in April (consensus was 228k). Also, the prior month’s number was revised down to just 85k from 126k estimated before. Meanwhile, unemployment rate inched lower from 5.5% to 5.4% during the same period, the lowest since 2008. Still, we think NFP was showing the strength of the US economy albeit with March being a weak month solely due to the cold weather impact. All sectors showed an increase in jobs except wholesale and mining sectors whilst the business services, construction and education showed a better rise in April than the prior three months’ average increase. We think UST yields will be rangebound this week. Our short term 10T target is 2.25%, with exit at 1.90%. At the same time, we have auction for the 3T ($24 billion), 10T ($24 billion) and 30T ($16 billion).