CIMB Daily Fixed Income Commentary - 26 Aug 2015

Market Roundup

• US Treasuries pared gains following the PBoC’s announcement of latest easing measures – lowering the one-year lending rate by 25bps to 4.6%, as well as channelling 150 billion worth of Yuan into the market. In addition, along with the recovery in some other stock markets, DJIA staged a technical rebound after the recent sharp drop, before turning into negative territory again in the second half session, also help in sending the UST yields higher amid diminishing risk aversion.
• Malaysian sovereign bonds recovered losses, guided by better bidding interest as USD/MYR uptrend was seen contained near 4.2500 on Tuesday. The MGS yield curve ended steeper, led by the gains in 7-year MGS, which rebounded after the recent selloff. On the other hand, the 10-year MGS reopening auction came at an issuance size of RM3 billion, in line with market expectation. WI was last traded at 4.38%.
• Thai govvies extended losses, amid persistent net selling interest shown by foreign players. Foreign players net sold Bt16.0 billion bonds since last Friday. Aside, IRS curve ended lower after the substantial rise in rates a day before amid bearish sentiment.
• Although USD/IDR traded north of 14050 for most of the Tuesday, Indonesia government bond market was well supported and even traded up due to some buying flows, especially on 10-year benchmark FR70 in morning session. A big local government agency also came in to bond market, bid 2 year bond. Afternoon session was basically quiet. MoF held Syariah bond auction, issued 100% from IDR 2.5 trillion target, with incoming bids reached IDR 6.3 trillion. We think bond market will still be volatile and depending on USDIDR movement. Volume dropped to IDR 12.5 trillion.
• Asian credits were better bidded, amid improved sentiment alongside technical rebound in some stock markets. Regional CDS spreads tightened in general, led by Malaysia, which ended 18bps tighter on Monday. We think that the downside risk remains intact amid thin liquidity, as bidding interest continues to subside.