MY Fixed Income Outlook 2Q2016_20160401

MY Fixed Income Outlook 2Q2016: It may be a quarter of two halves

·         MGS curve bull-flattened along the 3y10y as a combination of dovish major central banks, Ringgit strength and foreign inflows favouring the higher yielding regional bond markets pushed the MGS curve lower.

·         Near-term, the continuation of such momentum may force the 10y yield down to 3.70% and the MGS curve may stay supported well into 2Q16.

·         But in the second half of the quarter, unless the OPR cut expectation become more entrenched, we are more inclined to guide for an upward correction in yield with a target of 4.00% for the 10y MGS yield by end-2Q2016.