CIMB Daily Fixed Income Commentary - 25 Apr 2016

Market Roundup

• US Treasuries extended losses Friday, led by gains in stock markets and oil prices. In addition, we think that sentiment may turn to be more cautious heading towards the FOMC meeting this week, despite the market generally expecting the Fed not to hike rates this round.
• Other drivers this week include release of first reading in the US 1Q2016 GDP with consensus of an annualized 0.6% qoq growth but a day after the FOMC decision. There was also news BoJ is mulling offering loans to financial institutions with negative interest  rates, to ease impact on BoJ’s (negative) interest rate policy. BoJ policy meeting is scheduled this week on 28 Apr.
• USD recovered losses on Friday. USD/JPY surged and closed at 111.79, amid speculations of potential of further easing in BoJ monetary policy. Aside, EUR/USD headed lower to 1.1222, from 1.1288 closed a day prior. A break of 1.1200 may see some support near 1.1100 in the short term.
• Ringgit government bonds posted mild losses, in conjunction with weaker Ringgit on Friday. Meantime, daily volume shrank from RM3.2 billion to RM2.2 billion. We think players preferred to stay along the sideline ahead of the FOMC meeting.
• Thai government bond market continued to see selling pressure, with yield curve ended higher and steeper ahead of weekend. We reckon that the long dated papers may be pressured, due to the new supply from the anticipated Bt10 billion LB296A auction slated for 27 Apr.
• In Indonesia, the government yield curve bear steepened with hints of players shortening duration holding though losses were pared by bargain hunting interest. The 10-year FR56 was under pressure as it will be included in the coming week’s auction.