CIMB Daily Fixed Income Commentary - 27 Apr 2016

Market Roundup

• US Treasury yields edged higher across the curve, boosted by the uptick in oil prices, which were in turn triggered by a surprise decline in US crude inventories. Brent crude oil tested a high of $46.49/bbl, before settling lower at $45.74/bbl. On the other hand, economic data releases were mixed. Durable goods orders expanded by 0.8% in Mar, lower than consensus 1.9%, but better than 3.1% contraction registered a month prior. The Case-Shiller index showed house prices continued to rise in Feb but at a slower pace of 5.38% yoy against 5.50% consensus, whilst data suggested gains were moderate in a number of urban areas.

·  USD weakness persisted as the DXY further dipped to 94.57, from 94.84 recorded on Monday, weighed by weaker-than-expected durable goods orders reading. Weaker Dollar also comes ahead of the FOMC meeting, though traders were still wary of the Fed turning hawkish, pressure on the Dollar may persist if the Fed maintains its dovish tone.  USD/JPY moved within the range of 110.60-111.50, still hovering slightly lower than the recent high of 111.91. Elsewhere, EUR/USD recovered losses, as it trended higher to near 1.1300. USD strengthened against regional peers, but most gains were pared late Tuesday. USD/MYR spiked and tested 3.9500, but eventually closed at 3.9290. USD/IDR also edged higher to the intraday-high at 13235 before ended at 13205.

• Ringgit government bonds pared losses in conjunction with the weaker Ringgit Tuesday. In our opinion, Ringgit bonds may remain under pressure ahead of the FOMC meeting outcome, pairing with anticipated announcement of new Bank Negara Malaysia governor. The reopening auction for 7-year MGS benchmark was announced with an issuance size of RM3.0 billion, slightly below RM3.5 billion expected by us. WI was last heard at 3.85/77%.
• Thai government bonds recovered a tad from the prior week selloff, amid muted trading interest heading into FOMC meeting, as daily volume shrank from Bt11.1 billion to Bt8.1 billion, led by LB176A and LB25DA. Meantime, foreign players recorded heavier net selling interest amounting to Bt3.5 billion for second consecutive day.
• Indonesian government bonds strengthened, especially the auctioned bonds as the demand for the auction was good, with IDR24.4 trillion incoming bids. The government issued IDR13.4 trillion, a tad higher than IDR12 trillion initial target. Market tone appeared to be bullish post-auction, although some turbulence is to be expected ahead of the FOMC meeting. Market volume leaped to IDR21.1 trillion and dominated by bonds maturing in over 10 years (64%) and between 5 and 10 years (27%).