CIMB Daily Fixed Income Commentary - 26 Apr 2016

Market Roundup

• US Treasuries continued to show weakness, amid profit taking pressure heading towards the FOMC meeting and auction of the 2T, despite weaker crude oil and stock market performance. The 10T yield surged and surpassed the resistance level of 1.80% last week, while hovering near 1.90% late Monday. Immediate resistance should be at 2.00% at this juncture. Meantime, new home sales in Mar came at 511k, a tad below consensus 520k and prior month reading at 519k.
• Malaysian sovereign bonds moved in a narrow range to close mixed Monday. We see further consolidation at this juncture, and players may opt for trimming positions ahead of the FOMC meeting and anticipated announcement of the next Bank Negara governor, alongside expectation of new supply from the reopening auction for 7-year MGS. We expect the issue size to come at RM3.5 billion.
• Thai govvies were relatively stable, after the continuous selling pressure seen late last week. Due to the cautious sentiment, we see the 10-year benchmark bond should easily break above at 1.83% this week, which brings next resistance levels 1.91% and 1.97%.
• Indonesian government bonds weakened amid market jitters ahead of today's bond auction and this week's FOMC meeting, with banks and some local investors remaining net sellers. It will be interesting to see how successful today's bond auction will be, especially on the 20-year series that could indicate local interests. BI says they see IDR560 trillion to be repatriated in the tax amnesty program. We shall see whether their estimates come to fruition if and when the regulation is approved by Parliament. Market volume was IDR7.8 trillion on Monday. Most traded bonds were maturing in over 10 years (51%) and between 1 and 5 years (33%).