CIMB Daily Fixed Income Commentary - 01 Oct 2015

Market Roundup

• US Treasuries posted small gains ahead of scheduled Janet Yellen speech later this week (in which she is expected to reiterate the Fed’s view of rate hike this year) and Friday’s scheduled release of the Sep non-farm payrolls data. The Sep NFP number is expected to show an increase of 200k against +173k in Aug. Also due this week is the Sep ISM manufacturing index reading, with consensus expectation at 50.6 reading against 51.1 in Aug.
• The US Dollar remained strong on Wednesday though still recording quarterly declines against the Euro and Yen. The USD has been seeing support this past week as expectations of a Fed rate hike increases, after Janet Yellen remarked last week the central bank remains on course for the hike this year. Ahead of Friday’s NFP, in which a strong number will further support the USD, the ADP jobs report showed an increase of 200k in Sep, exceeding the earlier consensus expectation of +190k.
• Malaysian government bonds rallied with yields plunging as much as 25bps. Quarter-end demand, relatively firmer Ringgit, and bargain hunting are the reasons we blame for the better performance on Wednesday. In contrast to a week or so ago when MGS weakened, on Wednesday there was also a lack of negative response to the RM11.0 billion of maturing MGS Sep’15. We also like Bank Negara Dr Zeti’s comments, in which she said on top of no plans to peg the Ringgit, a potential selloff by foreigners on Ringgit bonds would not bring harm to the market as there is able support and demand from domestic players.
• Thailand’s government bonds showed strength on a day of heavy data releases and as THB also firmed. The USD/THB pair was hovering near 36.344 late Wednesday after hitting a daily high of 36.517. The firm bond market made do without aid of foreign players. TBMA reported that foreign investors were net sellers of Bt426 million of THB denominated bonds Wednesday.
• Indonesia government bonds rebounded on stronger Rupiah, responding positively to the government’s second stimulus package. Both locals and foreign buyers appeared in the market, lapping bonds ranging from 5- to 15-year tenors. BI also calmed the market, saying they will move into the FX forwards market to help stabilize the Rupiah.
• At the 3Q2015 end, Asian credits posted gains, though on light volume but there was bargain hunting after the prior day’s very weak performance. Still, there was limited upside as risk appetite remained elusive, especially as China and Hong Kong are due for holidays and as global markets await the Sep non-farm payrolls. We heard ahead of the China holidays that investors were looking for good bargains along the Chinese real estate names.