CIMB Daily Fixed Income Commentary - 21 Apr 2016

Market Roundup

• US Treasuries further weakened amid improved risk appetite whilst equities and oil prices strengthened. Brent crude oil rose by 3.5% and settled at $45.57/bbl, whilst DJIA was held steady above 18,000 on Wednesday. In economic release, existing home sales increased from 5.07 million recorded in Feb to 5.33 million in Mar or just ahead of consensus of 5.28 million. Ahead of next week’s FOMC period and in a blackout period, there were no Fed officials’ remarks to drive sentiment.
• Ringgit government bonds reversed losses amid positive buying flows during mid-week. We reckon that the demand was spurred from the stronger Ringgit, as USD/MYR touched the intraday-low at 3.8307 on Wednesday. On the flipside, headline inflation moderated to 2.6% in Mar, from 4.2% registered in Feb. The reading was also lower than consensus 3.4%.
• THB denominated government bonds closed marginally weaker Wednesday. Focus was on the Bt16 billion LB25DA auction, which garnered a decent bid-cover of 2.12 times, while average yield stopped at 1.6891, between high of 1.6930% and low of 1.6800%. Meantime, foreign players remained net sellers, totalling Bt867 million during mid-week.
• Indonesian government bonds were traded firmer, supported by bids on very short dated bonds up to 3-year, and also on 15- to 20-year tenors. MoF held a debt switching auction on Wednesday, buying short end bonds up to 3-year and selling 15- and 20-year benchmark bonds in return. Incoming offers were IDR1.8 trillion, and the government decided to swap IDR472 billion of bonds. We think bond market will maintain its positive tone for the rest of the week. Market volume increased to IDR14.6 trillion and most traded papers were those maturing in over 10-year (37%) and between 5- and 10-year (30%).