CIMB Daily Fixed Income Commentary - 29 Jun 2015

Market Roundup

• Net selling pressure along long dated US Treasuries sent the yield curve ended steeper last Friday, guided by robust reading from the University of Michigan Consumer Sentiment Index, which climbed to 96.1 in Jun, from 90.7 recorded a month before.
• EUR was dragged by the Greek debt tension, as the parties failed to break the deadlock in negotiation. This morning, EUR/USD found itself near 1.0973 from above 1.1420 last week. The ECB has decided not to increase emergency funding to Greek banks as the government is due to make a €1.6 billion repayment to the IMF on Tuesday. Prime Minister Alexis Tsipras has responded that banks in Greece will remain closed on Monday and that capital controls will be imposed.
• PBoC further cut its benchmark interest rate to record lows – the 1-year lending rate will be reduced by 25bps to 4.85% and the 1-year deposit rate by 25bps to 2.00%. In addition, the reserve ratios for lenders including city commercial and rural commercial banks will be cut by 50bps.

·  Malaysian sovereign bonds were dealt within narrow ranges on Friday, amid a lack of fresh guidance as well as watching developments from the Greek debt crisis. Aside, WI trading for the 5-year GII was last heard at 3.76/72%. Tender for the RM3.0 billion reopening of the 5-year GII (GII Aug’20) closes Monday.

• Thai govvies posted little gains, amid heavier trading interest on the short and medium term papers, led by LB196A, LB21DA and LB236A, while players continued to await cue from Greek saga.
• Indonesia government bonds were traded firm on buying action by foreign banks on Friday; however the movement was capped by uncertainties surrounding Greece. Market traded down on opening, however banks were seen bottom-fishing when yield went up 3-5bps, and buying momentum lasted until afternoon session, sending yield curve down to current level at closing. Transaction volume was relatively heavy amounting IDR14.2 trillion.