CIMB THB Monthly Fixed Income Commentary for Jul 2015

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

• Thai government bonds strengthened on a month-on-month basis, mainly due to the safe haven flows triggered by Greece and China’s stock market selldown earlier the month. Despite that, we noticed profit taking activities, led by foreign selling activities amid weakening THB, along with the other EM peers.
• Similarly, corporate bond market was well supported, with yields being pared lower by up to 20bps for short dated bonds with tenors up to 3-year. Apart from that, trading activities concentrated on the A rated segment.
• Despite the sluggish economic activities, we view that market has not fully priced in a rate cut heading into the upcoming MPC meeting slated for Aug 5. Meantime, our year-end projection for Thai bond yields comprise the 3-year govvies ending at 1.25% assuming a BoT rate cut to 1.00% and correspondingly the 10-year at 2.50%. For a shorter tern perspective, the 3-year govvies should remain supported below 1.75% and the 10-year below 3.00%.