CIMB Daily Fixed Income Commentary - 04 May 2016

Market Roundup

• US Treasuries posted gains with yields down 7bps along the bellies and far end of the curve, following declines in both stock markets and crude oil prices and the US Dollar paring losses after EUR/USD surged to above 1.1600 and USD/JPY a low of 105.55. Yields had shot up early session amid risk-off sentiment, spurred by. Brent crude continued its downtrend and settled near $45/bbl on Tuesday.
• In Fed-speak, Cleveland Fed president Loretta Mester said the Fed should wait for financial markets to calm down before hiking again. Meantime, the market awaits several economic data releases including ADP jobs data, trade balance, factory orders and durable goods orders for further directions, before the Friday’s NFP number.
• USD closed firmer against the major rivals, as DXY Index edged higher to 92.94, after the reaching a fresh low of 92.63 in prior day. USD/JPY rose and closed at 106.60, while short term support remains at 105.00. A break of 105.00 may see downside as far as 101.60. EUR/USD surged and tested the high at 1.1616, but eventually settled near 1.1500.
• Ringgit govvies were better supported after the market reopened on Tuesday. However, flows were relatively light at RM1.9 billion, in contrast to RM3.8 billion recorded on Friday. Similarly, IRS rates inched down by 1-2bps across the curve.
• Elsewhere, the central bank announced details for the reopening auction of the 15-year GII (GII Sep’30) with an issuance size of RM2.5 billion. WI was last heard at 4.50%. We think this auction will mostly depend on local support seeing scant evidence of offshore holding in the current outstanding amount, but should still garner firm demand seeing the smallish amount on offer.
• Thai government bonds were under selling pressure, amid thin flows seen on Tuesday.  Daily volume edged lower from Bt10 billion to Bt9.3 billion.
• This week we expect cautious trading ahead of MPC meeting. Resistance on the 10-year govvies remain 1.83%, a break above brings next resistance at 1.91% and 1.97%.
• IDR government bonds opened slightly higher following release of the Apr CPI number and S&P news (planned meetings by the rating agency with government officials ahead of ratings review). However, bidding interest retreated after net selling by foreign names at the bid level. The sharia auction saw strong demand and aggressive yields awarded (IDR13.2 trillion incoming bids and total amount upsized IDR2.3 trillion to IDR6.23 trillion). The bond market regained back post auction result with buying interests were seen from end client both local and foreign names. Market volume doubled to IDR11.6 trillion and dominated by papers maturing in over 10 years (67%) and bonds maturing between 1 and 5 years (18%).