CIMB Daily Fixed Income Commentary - 08 Sep 2015

Market Roundup

• US market closed on Labor Day.
• Malaysian government bonds weakened but on pretty thin volume despite the very weak Ringgit. On Monday, offshore players led the net selling. The 3-year MGS was seen rose to 3.56% (+25bps) but on just RM20 million volume. We think the larger fx-led sell off had already occurred in Aug after USD/MYR moved past the 3.8000 and 4.0000 levels. However, we think upside is limited, as politics, fx, and FOMC and Bank Negara’s MPC meeting remain up ahead. On the other hand, we also think a modest 0-10bps upside to yields is likely if MYR remains north of 4.3000 this week. Players are expected to avoid fresh bets in lieu of MPC and FOMC meetings.
• Thai government bonds closed mixed. Volume traded was slanted along shorter papers with less than 7-year maturities. Losses were slanted along the longer tenors, with the 10-year LB25DA (Dec’25) up 4bps to 2.90%. Sentiment was affected as the THB remained weak, seen above the 36.00 level at end of day at 36.118. Leading the activities was LB21DA at 2.55% up just 1bp.
• Indonesian government bonds came under selling pressure Monday due to USD/IDR shooting up to 14,250. Meanwhile, we noted foreign reserve for Aug fell by $ 1.9 billion to $105.35 billion.
• Asian dollar credits ended weaker as investors digested the mixed US non-farm payrolls number for Aug, and as global market look ahead to next week’s FOMC meeting. As risk appetite slightly ebbed, the Asia ex-Japan high grade index widened by 3bps on Monday. Sentiment was also guarded as China revised down its full year 2014 GDP growth (from 7.4% to 7.3%), and as US will remain closed Monday for Labor Day holiday.