CIMB Daily Fixed Income Commentary - 09 Jul 2015

Market Roundup

• US Treasuries received more demand upon the release of the recent FOMC meeting minutes, which showed the dovish tendency of the policymakers at the time. Only one out of the 10 FOMC members had opted for a rate hike in the Jun meeting. Additional spur for the interest into the safe haven UST were the stock market crash in China and sustained Greek concerns. The minutes also showed policymakers were concerned over the ongoing Greek talks at the time and risk to growth in China. This raises doubts whether the Fed will even be ready to hike rates at the Sep meeting.
• Greece reportedly requested a fresh three-year bailout program from the ESM and to avoid default on upcoming repayment to the ECB. Reports suggest Greece was offering to implement tax and pension reforms. Deadline is supposedly Sunday this week whilst Greece is scheduled to pay up €3.5 billion to the ECB on 20 Jul. EUR/USD was a firm 1.1077 this morning against 1.1011 the day before.
• Malaysian sovereign bonds weakened further Wednesday, amid the weakening Ringgit. Notably, the 3-year MGS was traded 8bps higher at 3.26%, while we saw GII papers trekking losses in the MGS space, particularly along the front end and bellies of the curve.
• Thai government bonds strengthened on Wednesday, trekking the gains in overnight US Treasuries. Despite the positive movement, short dated bond yields were anchored near the policy rate. Meanwhile, market saw heavy flows amounting Bt55.2 billion, aided by the auctions conducted for LB446A and LB206A.
• Indonesia government bond market was on sell-down following auction day. Banks trimmed their position on auctioned series, FR72 (21-year) seen given in market as it was long-tailed. Market was quite sensitive with the correction in the bond market, regular bond size traded caused prices to move around 25 cents. We still see volatility in the market. However, we expect market to stage buying support at 8.50%-8.60% for the 10-year paper. Aside, volume increased to IDR19.1 trillion.
• Asian credits were dealt weaker, amid risk-off sentiment, after Greece was given ultimatum to resolve its crisis by this Sunday. On the other hand, steep decline in China and HK stock markets also weighed on the bearish sentiment.