CIMB MYR and USD Weekly Fixed Income Commentary for 07 Aug 2015

Market Roundup

• Ringgit government bonds were under pressure alongside the weakening Ringgit, as USD/MYR trended higher from 3.8310 to 3.9295, the highest since Sep 1998. Decline in Brent crude oil also weighed on Ringgit, as the commodity fell from $52.21/bbl to $49.51/bbl on a week-on-week basis. Elsewhere, Malaysian sovereign yield curve ended flatter, driven by the heavier selling activities on the bellies of the curve. The central bank announced reopening auction for 5-year MGS, which came at an issuance size of RM3.5 billion. When-issued was last heard at 3.85% on Friday, about 23bps higher than a week ago, amid jittery sentiment.
• Ringgit credits were moving within narrow range, while trading interest was slanted toward front end and bellies of the curve. Nevertheless, we noted that investors continued to show bargain hunting interest on selective papers, particularly amid the absence of sizeable primary pipelines. Furthermore, we see limited upside for GG and AAA papers at this juncture, mainly due to the tighter spreads, on the heels of rise in MGS yields.
• US Treasury yield curve ended flatter, amid mixed signals from the recent economic indicators. However, the short dated yields climbed further, guided by Atlanta Fed President Dennis Lockhart’s hawkish statement, which signalled for a September rate hike, also exerted selling pressure onto the US Treasuries. On top of that, the longer dated yields were pared lower, amid falling crude oil prices and softer inflation outlook in the long term.
• Asian dollar credits moved in sideways, while investors continued to show better bidding interest along the IG segments. Malay 25 and Petrol 25 recovered losses and were quoted tighter by 3-6bps on a week-on-week basis.