CIMB Daily Fixed Income Commentary - 06 Oct 2015

Market Roundup

• US Treasury yield curve ended higher and steeper, guided by profit taking activities alongside the gains in stock markets, as players perceived that the latest weaker-than-expected non-farm payrolls release may prompt for a delay in a Fed rate hike.
• Ringgit sovereign bond yields inched lower on the front end and bellies of the curve, despite the recovery in MYR post release of weaker-than-expected Sep US NFP number. Aside, sentiment remained cautious, as flows were slanted towards short tenor papers, including GII Feb’16, MGS Jul’16 and Sep’16.
• Thai government bonds closed little changed, despite the gains in UST post NFP release on Friday. We think there is mild support for Thai govvies in the coming week, on the heels of the weaker-than-anticipated US NFP release. On top of that, BoT not upbeat on growth expectations and weak inflation will aid sentiment.
• Indonesia government bond market posted substantial gains as Rupiah strengthened to 14,500 level on the back of weak US NFP data, setting stage for more probability on this month's FOMC to keep Fed funds rate unchanged. Offshore inflows were seen throughout the day, while offshore interbank aggressively bidded in the market, practically took most of offers available in the market especially highly popular benchmark series on all tenors. Thin bond supply caused market prices to go up very quickly. Despite the gains, we think there is still upside for bond market with third round of stimulus package announcement coming up this week, however suggest cautious trading with potential profit taking action. Elsewhere, trading volume fell to IDR 8.8 trillion.
• Asian credits were dealt firm on the back of weaker-than-expected US NFP report released last Friday. Meanwhile, CDS spreads tightened across the board, along with the increased speculation of a potential delay in rate hike by Fed.