Market Roundup
- US Treasury yield curve ended marginally steeper, amid volatile movement during mid-week. The UST yields plunged in the morning session, reacting to the sharp decline in stock markets, before subsequently trended higher to finish almost unchanged near end of the day, in conjunction with the stock market recovery. The 10T yield broke the technical support at 2.10% and tested 2.04%, but eventually rose and closed at 2.15%.
- Malaysian sovereign bond yield curve continued shifting higher, guided by selling activities amid weakening Ringgit. USD/MYR peaked at 4.0422, before eventually finished lower at 4.0275.
- Thai market closed on the Queen’s Birthday holiday.
- IDR government bond market sell-off with IDR currency went through 13,800 level, in line with global currencies movement as risk-off mode continues due to CNY devaluation. Bond market was jittery with wide bid-offer spread. BI came in to the market to support, held reverse auction in morning session. IDR 2 trillion of bonds were taken out of market as BI absorbed that much in the reverse auction, providing stability in bond market. Before closing hours MoF also held buyback auction, bought IDR 500 billion of short dated bonds up to 2-year. We think bond will still be volatile if USDIDR does not improve, however selective buying on bond may occur, although the amount might not be in size. Volume continued to improve to IDR 13.8 trillion.
- Asian credits took a hit after the Yuan devaluation move by PBoC, which sparked concern on the shift in US rate hike timing as well as potential currency war. Notably, regional CDS spreads widened by 7-18bps amid risk-off sentiment on the emerging markets.
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