CIMB Daily Fixed Income Commentary - 15 Oct 2015

Market Roundup

• US Treasury yields fell across the curve, triggered by weaker-than-expected numbers from both retail sales and producer prices, as market perceived the soft economic data may defer the timing for a Fed rate hike this year.
• Malaysian government bonds were dealt mixed, while we noted profit taking activities emerged along with weakening MYR. Aside, trading volume was thinner at RM1.7 billion ahead of the Awal Muharram public holiday, in contrast to RM2.4 billion recorded on Monday.
• Shorter dated Thai government bonds strengthened, along with gains in THB, as USD/THB inched lower to 35.53. Meantime, market remained muted, as daily volume dipped from Bt12.8 to Bt8.2 billion.
• Indonesia government bond market traded down on auction day, as government upsized today's bond auction by IDR 1 trillion (to IDR 9 trillion) from IDR 8 trillion target, despite only garnered IDR 11.2 trillion incoming bids. 5-year auctioned bond (FR53) was long tailed by 10 bps yield. Market was not responding well to the auction result, with sellers emerged especially on auctioned bonds 10-year FR56 and 5-year FR53. We think auction result has set the tone for this week, we foresee bond market under selling pressure with 10-year yield has a chance to go higher from here. Volume increased to IDR 13.4 trillion.
• Asian credits were dealt firmer, but gains were capped by quick profit taking activities during mid-week. On the other hand, CDS spreads for both Malaysia and Indonesia widened up to 14bps, after tightened up substantially lately amid risk-on sentiment in EM space.