CIMB THB Weekly Fixed Income Commentary for 03 Jul 2015

Market Roundup

• Thai govvies remain supported in the first week of July, seeing their safe haven allure and supported by sustained UST strength as global markets focused on Greece. In the short term (1-2 month horizon), Thai govvies should remain supported, especially if domestic macro data continue to disappoint whilst UST strength endures.
• As we move into 2H2015, our year-end projection for Thai bond yields comprise the 3-year govvies ending at 1.25% assuming a BoT rate cut to 1.00% and correspondingly the 10-year at 2.50%. For a shorter term perspective, the 3-year govvies should remain supported below 2.00% and the 10-year below 3.20%.
• Ahead of the next MPC meeting,  we expect swap rates to fall further and see the 5X5 swap spread moving to mid-point of the -10bps to -20bps range. The next BoT meeting is 5 Aug, followed by 16 Sep and 4 Nov, with the last on 16 Dec 2015.