CIMB Daily Fixed Income Commentary - 30 Oct 2015

Market Roundup

• US Treasuries continued to weaken after this week the Fed left open the possibility of an interest rate hike, probably as soon as the Dec FOMC meeting. The 30-year yield was pushed to its highest in just over a month. Also pressuring the market was release of the 3Q2015 GDP which showed growth of 1.5% annualized, just below consensus estimate of +1.6%.
• The Dollar showed some weakness after the release of 3Q2015 GDP data but remained relatively firm since the FOMC meeting this week. EUR/USD is now about 1.0992 and USD/JPY at 121.00. The Dollar index was down 0.5% to 97.261 overnight.
• Malaysian government bonds proved resilient even as the Ringgit weakened (amid Dollar strength post FOMC) and the auction held. The central bank sold a small RM1.5 billion of the new 20-year GII (GII Oct’35) at 4.79% and bid-cover of 2.44 times. Meantime, USD/MYR saw daily high of 4.3040.
• Aside, the 3-year MGS rose 1bp to 3.58%. We think short tenor MGS (1-2 years) will sustain mild strength in the short term based on continued attractive $ASW levels. We like the new 20-year GII, seen about 30bps above the 20-year MGS.
• Thai govvies ended weaker but yields rose within a narrow 1.3bps. This came as THB weakened to around 35.594 late Thursday. Aside, ahead of the next MPC meeting, we don’t see much support as we think yields have priced in possibility of a quick rate cut.
• Indonesia government bond yields went rose following hawkish FOMC news. Bond prices were 75-100c wider with an offerish feel in the market. Foreign interbank names were heard trimming positions. We may see bond prices still adjusting to Fed's news in the next few days. Volume traded dropped to IDR10.6 trillion

·  Asian dollar credits saw only mild strength post-FOMC. We think despite some momentum for improved risk appetite (as UST weakens), continued concerns over Asia’s credits amidst growth risks, weak currencies, and anticipated large debt maturities heading towards the end of year, contributed to the sluggish trading on Thursday.