CIMB Daily Fixed Income Commentary - 29 Jul 2015

Market Roundup

• US Treasuries reversed some gains, driven by risk-on appetite after seeing the gains in stock markets, alongside some profit taking ahead of FOMC meeting. The Treasury Department sold $26 billion 2T on Tuesday. Demand was firm with a bid-cover of 3.42 times, in contrast to 3.28 times garnered in previous similar auction. High yield stopped at 0.69%, while indirect bidders accounted for 54.4% of the auction amount.
• Malaysian government bonds posted losses, driven by profit taking activities heading towards FOMC, while sentiment was also dampened by the domestic political issue. Focus was on the MGS Aug’15, which contributed RM1 billion worth of trading volume, while yield closed 9bps lower at 3.10%. BNM announced the reopening auction for 10-year GII, which came at an issuance size of RM3.5 billion. WI was last heard at 4.15/05%.
• THB denominated government bond yields inched lower, tracking the gains in overnight UST. However, gains were capped by cautious trading, particularly after the selling activities last week.
• Indonesia government bond market was under heavy selling pressure on Tuesday due to risk-off sentiment triggered by China stock market crash. Foreign banks were seen initiating selling action, with FR70 (03/24) dominated the market, followed by longer dated bonds FR72 (05/36) and FR71 (03/29). On Syariah auction, government issued IDR400 billion more than IDR2.5 trillion initial target, with incoming bids reached IDR6.7 trillion, concentrated on tenors up to 3-year (IDR 5.9 trillion). We think market will remain jitter until improvement in China stock market. Meantime, trading volume jumped to IDR 13.1 trillion.
• Asian credit market closed mixed, alongside improved sentiment despite cautious trading heading into FOMC this week. Elsewhere, iTraxx Asia ex-Japan IG Index tightened marginally from 111bps to 110bps on Tuesday.