CIMB Daily Fixed Income Commentary - 06 Nov 2015

Market Roundup

• UST inched higher amid anticipation of a decent NFP, which will eventually increase the possibility for a Dec rate hike by Fed. However, the upside movement of UST yield was capped by buying-on-dips interest. The 10T yield touched the high of 2.26%, but was unable to sustain above 2.25% and closed lower at 2.23%.
• The greenback remained firm, but was slightly under profit taking pressure ahead of US NFP release. USD/JPY consolidated at a lower range of 121.60-121.80, after peaking at 122.00.
• Ringgit sovereign bonds ended weaker, amid a lack of fresh catalyst to boost the buying demand. We noted mild selling pressure on short dated papers, possibly due to the higher USD/MYR (nearer to 4.3000), which triggered cutting losses for currency play. Bank Negara held the OPR unchanged at 3.25% as widely expected. The MPC statement sounded neutral, but there were stern warnings of risk to growth going forward. Base on current conditions and tone of the statement, we see little potential for any shift in policy at least in 1H2016. But in instance of a quick deterioration in external environment and financial market volatility in the coming weeks or months, we will not be surprised if its statements morph into a more dovish tone in the coming meetings.
• Thai government bonds slightly weakened on Thursday. Yields moved up within a tight range. As the THB weakened, foreign investors were net sellers of a Bt956 million of Thai bonds on the day.  USD/THB closed Thursday at 35.59 against 35.457 a day previous.
• Indonesia government bond market opened lower with wide bid/offer spread on Yellen's hawkish statement about The Fed rate policy.  However, market turned back after strong buying came in to the market particularly in 10-year bucket.  We saw the foreign banks and AM were behind this buying action.  Market is stable but we think prone to profit taking action ahead US job data, BI rate meeting and next week bond auction sentiments. Volume increased to IDR 11.2 trillion.
• Asian dollar credits continued to move in mixed directions, while risk-on sentiment was dampened by the Fed chief Janet Yellen’s rate hike remark during mid-week testimony. The newly launched Sri Lanka Nov’25 widened from 6.91% to 6.93%.