CIMB MYR and USD Monthly Fixed Income Commentary for Jul 2015

Attached is the monthly market commentary for Jul 2015. We have included the near term outlook for the month of Aug 2015.

• The story for the month was of course the plunging Ringgit. There was good demand in Malaysian government bonds, especially focused on the front end and bellies of the yield curve. However, the steep weakening of MYR against USD (USD/MYR surpassed 3.8200) during the end of the July triggered a selloff event, which reversed the gains posted earlier the month.
• The central bank held just two auctions in July, with the issuer (government) and agent (central bank) giving leeway for the mid-month Hari Raya break. First, before the Raya break saw the RM2.0 billion reopening of the 30-year MGS (MGS Sep’43). The auction scored a bid-to-cover ratio of 2.025 times for the small tender amount. At end-month, the government then held the RM3.5 billion auction of the 10-year GII (GII Oct’25), which garnered a decent bid-to-cover ratio of 1.854 times.
• Corporate bonds saw firm performance in Jul, aided by the govvies strength and a lack of large primary market activity (boosting interest onto the secondary trading). However, the decline in yield was generally pretty limited especially as volume traded was thin in alongside the Raya break and investors focus was much on selected names only. These include high grade AAA names like Danga, Putrajaya and Aman, as well as selected AA names like BGSM, Malakoff, TBEI and WCT. Indicative numbers by Bank Negara PDS and BPAM both show PDS yields were down about 1-2bps during the month (AAA down to AA3 segments).