CIMB Daily Fixed Income Commentary - 01 Sep 2015

Market Roundup

• US Treasury yields edged higher on Monday, guided by sharp rebound in crude oil prices alongside a renewed speculation for rate hike this year. During the weekend, Fed Vice Chairman Stanley Fischer believed that the inflation will eventually rise to the 2% objective, and pointed that “the policymakers may remove the accommodation at a gradual pace at a low inflation environment”.
• The Dollar weakened against the Yen and Euro, amid the sluggish global stock market performance overnight. The JPY strengthened as it remains viewed as safe haven currency. Meanwhile, the Euro gained as carry trades reversed under the ongoing market volatility. USD/JPY was around 121.14 this morning versus 121.23 overnight whilst EUR/USD was at 1.1223 versus 1.1211 overnight.
• Asian currencies closed out the month of August on much weaker levels month-on-month, brought down by the Yuan devaluation and risk-off mode along global capital markets, as well as concerns the Fed will raise interest rate come the Sep FOMC meeting. The Yuan was devalued on 11 Aug. Leading the Asian tumble was the Ringgit which fell 8.62% mom followed by the Rupiah at a much smaller 3.75%. However, this morning Asian currencies saw gains against the sluggish Dollar whilst global crude oil price higher (Brent above $50 per barrel) was keeping USD/MYR below the 4.2000 level.
• Ringgit govvies rallied last Friday, recovering losses guided by the firm MYR against USD heading into the long weekend. USD/MYR closed lower at 4.1925 alongside recent gains in crude oil prices.
• Thai government bond market remained muted, as daily volume was recorded at Bt9.3 billion, a tad higher than Bt8.9 billion recorded ahead of weekend, while highlight was on the bellies of the curve, including LB196A and LB21DA.
• Indonesia government bond market was quiet on Monday ahead of today's bond auction. Better bid seen in 15-year bucket, sending down 15-year by 5 bps. Nothing much was seen elsewhere. MoF targets IDR 10 trillion of bonds issuance on today's auction. We think demand will be solid with positive sentiment caused by government stimulus plan, with details to be announced more by government sometime this week. Volume remained small amounting IDR 6.8 trillion only.