Market Roundup
- US Treasuries closed mixed in contrast to previous days’ drop in yields which was due to safe haven flows, as global stock markets showed firm movement on Tuesday. Partly, the weak Chinese stock market was aided by PBOC offering to inject just short of $20 billion of liquidity via 7-day reverse repo at 2.25%. The PBOC action came despite a day earlier not renewing a credit line of about the same amount to China Development Bank in their view that liquidity had remained ample.
- EUR/USD fell to around 1.0768 overnight and now hovering near 1.0744 as the Dollar was supported on safe haven flows after this week’s rout in global stock markets. Further pressuring the Euro was continued weak inflation numbers in the Euro Zone. The Euro Zone CPI registered +0.2% in Dec against consensus of +0.3%.
- Malaysian sovereign bond market remained quiet on Tuesday. We think that the 5X7 MGS spread was wide at 58bps, much wider than the historical mean of about 30bpsfor the past 1 year. Hence, suggest to swap 5-year MGS into 7-year MGS for better yield pickup. Meantime, WI for the new 7-year GII was last done at 4.39 Tuesday.
- Thai government bonds extended losses in conjunction with weaker THB. We reckon that the upside for the longer dated bonds may be capped by the influx of new supplies (Bt45 billion) scheduled this month, amid a lack of fresh catalyst in the near term.
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