CIMB Daily Fixed Income Commentary - 05 Apr 2016

Market Roundup

• US Treasury yield curve moved marginally flatter as longer dated bond yields marginally fell on Monday. Gains were guided by soft readings economic data releases and declines in both equities and crude oil prices.
• In economic data releases, US factory orders contracted by 1.7% in Feb, in line with market expectation, and lower than the 1.2% expansion recorded a month prior. Meanwhile, durable goods orders recorded at -3.0% during the same period, weaker than consensus forecast at -2.8%.
• The market (in the short term horizon) is expected to give more weight to recent remarks by Yellen and content of the FOMC minutes (which may provide clearer arguments for a delay in Fed tightening). With that, we see mild support for UST in the coming week, and the yield curve should remain relatively flat. For the 10T, a break below 1.72% will give next support at 1.66%.
• Ringgit govvies closed mixed, amid profit taking activities in conjunction with weaker Ringgit. Elsewhere, trading volume shrank from RM6.5 billion to RM2.8 billion early the week. USD/MYR is around 3.9178 this morning against 3.9000-3.9170 late Monday.
• Thai sovereign bonds strengthened a tad, amid thinner flows, as daily transaction dipped from Bt19.2 billion to Bt16.5 billion on Monday. Market is now eyeing for auctions (LB446A and LB206A) conducted on Tuesday.
• Indonesian government bonds were dealt weaker on profit taking action Monday. We saw both local and foreign names behind the selling action. We think bonds are a bit prone to profit taking pressure, but we expect end investors to continue bidding especially on longer dated bonds (15-20 years). MoF will hold IDR Syariah bond auctions today with IDR4 trillion indicative target. We think demand will still be solid especially on very short dated series and the 15-year Syariah papers. Market volume fell to IDR9.7 trillion.