CIMB Daily Fixed Income Commentary - 29 Apr 2016

Market Roundup

• US Treasury yields headed lower across the curve, guided by softer-than-expected 1Q2016 GDP reading and decline in equity prices. The 10T yield spiked to an intraday-high of 1.87%, partly due to the rise in oil prices, but eventually closed lower at 1.83%.
• The 1Q2016 GDP showed a disappointing reading of +0.5% qoq annualized against consensus of +0.7%. On the positive side, personal consumption grew at 1.9% during the same period, higher than the forecast of 1.7%. Initial jobless claims came lower-than-expected at 257k for the week ended 23 Apr, versus 259k projected earlier.
• Ringgit govvies closed mixed on Thursday. Flows were seen heavier at RM5.1 billion, aided by the 7-year MGS reopening auction. While sentiment improved post FOMC, selling pressure persisted due to profit taking activity as well as some trimming of positions post auction. The RM3 billion 7-year reopening auction ended with decent demand, as bid-cover ratio reached 2.044 times. Average yield stopped at 3.800%, and done within a narrow spread of 3.785-3.809%, but lower than WI trading 3.81-3.83% dealt a day prior the tender close.
• Thai sovereign bonds closed marginally firmer on Thursday, after the Fed decided to maintain its accommodative policy stance. USD/THB fell from the topside near 35.20 and broke the support of 35.00. We expect to see support near 34.80 in the near term. On the flipside, foreign players marked a heavy net selling amount totalling Bt11.6 billion, possibly due to profit taking on the back of stronger THB, in our view. Upcoming focus will be on the economic data releases including foreign reserves, exports, BoP current account balance and CPI.
• Indonesia’s government bond market weakened post-FOMC, whilst activities were led by interbank trades. Sentiment was dampened amid growing uncertainty, after the government expects the budget deficit to widen to 2.4-2.5% of GDP from previous target of 2.15%. This means that the government needs IDR46 trillion of additional financing, where IDR27 trillion will be funded from market. We think market is fragile right now. However, we expect some buying-on-dips to emerge. Market volume fell to IDR14.1 trillio, dominated by bonds maturing in over 10 years (46%) and 1-5 years (20%).