CIMB Daily Fixed Income Commentary - 15 Sep 2015

Market Roundup

• US Treasuries closed little changed on Monday, as the market appeared to be directionless ahead of the upcoming FOMC meeting.  However, market was seen with better bidding interest, reacting to the decline in stock markets, as well as drop in crude oil prices.
• Malaysian government bond market saw heavier transactions totalling RM2.4 billion, compared to RM1.0 billion recorded last Friday. Activities were slanted towards the shorter term papers MGS Sep’18 and Mar’19. The newly tendered RM4 billion MGS Mar’19 garnered a moderate bid-cover of 1.5275 times, with average yield closed at 3.759%, lower than the WI levels of 3.79/77% heard last week.
• Thai govvies ended firmer, recovering some losses posted last week. However, sentiment remained guarded ahead of both major events – MPC and FOMC meetings this week. Despite us seeing BoT having room to lower rates by as much as 50bps before the year-end, the comments from BoT officials that it will not allow the currency to weaken beyond ‘fundamentals’ may be a deterrent to an immediate cut, having seen already two cuts this year. At this juncture, market is generally anticipating the central bank to keep the rate unchanged at 1.50%.
• Indonesia government bond market was very quiet with bond auction looming. Bids were defensive with most of market players stand pat ahead of this week's FOMC meeting. On today's bond auction, MoF targets IDR 8 trillion issuance on 9-month SPN, 5-year, 15-year and 30-year bonds. We think demand could be low for this auction with only bargain hunters attempting to bid on higher yields. Also, we think bond market will be mostly trade in range ahead of FOMC, with downside pressure coming from today's auction. Aside, trading volume halved to IDR 5.1 trillion.
• Asian dollar credits hovered near prior levels, as players preferred to stay at the sidelines heading towards the upcoming FOMC meeting scheduled on Sep 16-17. Elsewhere, iTraxx ex-Japan IG Index tightened marginally by about 1.5bps to 134.5bps on Monday.