CIMB Daily Fixed Income Commentary - 02 Nov 2015

Market Roundup

• US Treasury yield curve ended flatter ahead of weekend, as the medium and long term UST yields weighed lower by softer readings from personal spending. However, short dated 2T yield appeared to be well supported at 0.71%, and edged higher to 0.73% on Friday, as players viewed that Dec rate hike expectation remains intact.
• USD/JPY was unable to sustain above 121.00, and traded lower near 120.60 on Friday, after the BoJ decided not to step up for an expansion to its stimulus programme. On the other hand, EUR/USD recovered further above support level of 1.1000 after hitting the low at 1.0900 during mid-week.
• Malaysian government bond trading was quiet amid a lack of fresh drivers. Though UST yields have surged (the 30T highest in over a month), weakness in Malaysian bonds was pared, seeing sustained demand for shorter tenor bonds. On one hand, Malaysia’s central bank is not expected to move policy anytime soon – supporting yields near present levels. On the other, we think foreign players remained on the lookout for Ringgit bonds with short maturity. We partly base this on what we think as attractive Dollar asset swap levels via purchase of the shortest of Ringgit government bonds. The Ringgit momentarily above 4.3500 intraday Friday did little to squash demand for bonds. The 10-year MGS ended at 4.12% (unch).
• Thai govvies recorded mild losses, whilst IRS rates also rose, paring the Sep’s monthly gains. Yields probably stayed close as we head towards next week’s MPC meeting. On Friday, sentiment was aided by Sep’s trade balance rising to $4.0 billion from $2.9 billion in Aug, though the current account balance fell to $1.56 billion from $1.74 billion consensus estimate. Exports fell 5.4% yoy in Sep versus -5.6% in Aug and imports fell a large 21.3% against -10.8% in Aug.
• Indonesia government bond market traded down on Friday in line with weaker Rupiah, continuing Thursday's movement. Foreign banks were sellers with selling action appeared in the morning, however more selling activities only started 1 hour before market closed. We still see bond market to be volatile going forward, and next week's US jobs data will be the catalyst. Market volume increased to IDR 13.5 trillion.
• The iTraxx Asia ex-Japan IG index was heard moving tighter by a narrow range of 1-2bps. The Asian dollar space has received some interest as risk appetite slightly improved after the recent FOMC meeting and after spreads had widened. However, concerns over growth and weak currencies, contributed to the lacklustre trading on Friday.