CIMB Daily Fixed Income Commentary - 06 May 2016

Market Roundup

• US Treasuries were dealt firmer, amid increased risk-off sentiment following the declines in stock markets and oil prices during mid-day, despite both equity and oil prices ended flat on Thursday. Meanwhile, Atlanta Fed president said even if option for a rate hike in Jun is an ‘option’, he is still undecided whether to support this and will look towards incoming macro data. He added that he would like to see continued ‘solid employment reports’. Aside, initial jobless claims were higher at 274k as at 30 Apr, against consensus 260k and prior reading at 257k. Market is eyeing for a mild NFP number at 200k for month of Apr, while expecting the unemployment rate to inch lower from 5.0% to 4.9% during the same period.
• USD strength persisted despite weaker-than-expect jobless claims data released on Thursday. USD/JPY edged higher to 107.26, approaching the near term resistance at 108.00. Elsewhere, EUR/USD was under pressure and slipped to near 1.1400 late Thursday. The currency pair may trend lower, with short term support at 1.1250-1.1300, if US NFP number turns out to be upbeat. On the other hand, regional currencies were mostly in range against the USD. USD/MYR tested the high of 4.0200, but was eventually pared lower and hovered near 4.0000 throughout the day. We expect to see some consolidation as markets await direction from the US NFP data. Consensus still show NFP at a smaller 200k for Apr against +215k in Mar.
• Ringgit sovereign bonds weakened alongside the weaker Ringgit, but eventually saw buyers came in to support. Despite that, IRS curve edged lower by 1-2bps across the curve on Thursday. The RM2.5 billion 15-year GII reopening auction ended with a firm bid-cover ratio of 2.62 times. Average yield stopped at 4.417%, in between a spread of 4.398-4.455%.