CIMB Daily Fixed Income Commentary - 12 Aug 2015

Market Roundup

• US Treasury yields fell substantially, driven by stronger demand for safe-haven assets, on the heels of the decline in global stock markets, amid risk-off sentiment following the Yuan devaluation.
• Ringgit sovereign bond market was pretty active, as daily volume surpassed RM4.7 billion, led by the 5-year MGS reopening auction. On the other hand, offshore players continued exerting selling pressure to the Ringgit govvies, amid weakening Ringgit on Tuesday, while we noted local players were better buyers due to the attractive yields offered at this juncture.
• Trading interest in Thai government bond market remained muted, despite the daily transaction edged higher from Bt7.0 billion to Bt11.3 billion. Meanwhile, the government bond yields inched up, tracking the overnight losses in UST, amid jittery sentiment alongside the weakening THB.
• Risk off sentiment was seen in Indonesia government bond market, in line with the weakening in IDR, as USD/IDR reached 13,600 level. Generally market was quiet as practically everybody was staying on the sidelines and digested CNY devaluation. Bond yield curve bear steepened as market players look to offer especially longer-dated bonds at lower prices. MoF held Syariah bond auction today with IDR 2.5 trillion target, incoming bids reached IDR 11.8 trillion mostly in 2.5-year tenor and below (91% from total incoming bids). MoF issued IDR 3.59 trillion of Syariah bonds. We think market will be on risk-off mode in general but selective buying may arise at this level and support the market. Volume improved to IDR 8.7 trillion.
• Asian credit market was surprisingly quiet, after the PBoC devalued Yuan by about 2% against the greenback. The easing move was initially thought to boost the credit market, however greater volatility in FX market accidentally dampened the activities in both primary and secondary markets. iTraxx ex-Japan IG Index widened by about 1.5bps to 114.5bps.