Fixed Income Daily Pulse, 5 June 2015

The day’s trade recap (from our trading desk):

·  The month started off sideways with very light traded volumes, even with the sell down in MYR and local equity market during the start of the week. Trading activity in the local govvies picked up mid-week with particular focus on the short end bonds while the benchmarks volume on the longer ends remained light. There is one particular ticket with a size of RM1.04b done on the MSG ‘9/16, suspecting that it was done by a foreign name, who have been also actively collecting the short end bonds for a real money flow over the past 2 weeks. Apart from the support on the short end where the 3 year gained 2 bps, yields on the MGS curve rose up between 4-15 bps; while the GII curve rose between 3-12 bps. Spread of GII against MGS was between 11-19 bps up to 7-year while 10-year to 20-year was narrow between 1-6 bps. The MGS 10-year auction closed at levels in line with WI but saw a weak BTC of 1.669x. This is most probably due to a heavy street positioning and players would rather not to add on risk on going into NFP data. There was a sell down on the 10-year MGS post auction with closing bids above the auction cut-off level. Albeit the sell down on the 10-year, there was some selective buying on the longer ends from local real money. Trading volume in the GG/AAA segment remained light. Notable trade is the ADCB Finance (Cayman) Limited ‘11/17 declined 1 bp to 4.31%, with a collective trading volume of RM10m. Meanwhile, TNB Northern Energy Berhad traded remained unchanged to 4.24%, with RM5m changed hands. In the AA segment, Tanjung Bin Energy Issuer Berhad ‘09/28 traded 9 bps lower to 5.25%, with RM10m done. Elsewhere, DRB-Hicom Berhad ‘05/15 also saw the yields declined 1 bp and closed at 4.82%, with only RM29m changed hands. MGS Benchmark Issues MGS Closing Level (%) Chg (bp) Vol (RM m) 3-yr 3.310 -0.02 0 5-yr 3.640 +0.02 8 7-yr 3.930 +0.03 30 10-yr 4.070 +1.03 1955 15-yr 4.230 +0.01 19 20-yr 4.320 - - 30-yr 4.720 0.0 140 IRS Closing Rates IRS Closing Yld (%) Chg (bp) 1-yr 3.655 +0.8 3-yr 3.740 -1.5 5-yr 3.988 -1.3 7-yr 4.160 -3.5 10-yr 4.405 -4.2 Source: Bloomberg, AmBank

               

  

Local News:

•  Export declined 8.8% surpassing most economists’ expectations, due to lower exports of refined petroleum products. On the other hand, imports also exceeded the consensus, by decreasing 7.0%. The decrease in imports was mainly attributed to capital goods and intermediate goods. Overall, trade surplus shrank to RM 6.89 billion.
• The international reserves of Bank Negara Malaysia amounted to USD$106.4 billion as at 29 May 2015. The reserves position is sufficient to finance 8.2 months of retained imports and is 1.1 times the short-term external debt.