CIMB Daily Fixed Income Commentary - 26 May 2016

Market Roundup

• US Treasury yields inched higher across the curve, alongside upticks in stock market and oil prices. Apart from that, pressure was also added after non-voting official Dallas Fed president Robert Kaplan voiced his support for a rate hike in “near future, but may not be in Jun or Jul” if economic conditions continue to remain healthy.
• Weakness in Ringgit sovereign bond market persisted, in conjunction with higher overnight UST yields, despite a slight pullback in USD/MYR. Meanwhile, the market saw thinner flows totalling RM2.8 billion, down from RM3.9 billion recorded a day prior.
• Thai sovereign bonds further weakened, with yields inching higher across the curve. Meantime, daily volume was thinner at Bt18.2 billion, in contrast to Bt21.0 billion recorded in the previous day. Despite the mild losses posted by govvies, IRS rates rose by 6-10bps on the bellies and long end of the curve. Aside, customs exports came weaker than expected at -8.00% in Apr, against consensus -1.50%, whilst customs imports were also subdued at -14.92% during the same period, compared to consensus -7.65%.
• Indonesian government bonds strengthened with foreign onshore banks seen buying auctioned benchmark bonds especially the 10-year FR56 and 15-year FR73, while local banks were on the offer side. Supply appeared to be thin as sellers seemed reluctant to sell bonds in large sizes. We expect the Indonesian government bond market to remain volatile ahead of next month's FOMC meeting. Market volume dropped to IDR10 trillion and was dominated by bonds maturing in over 10 years (65%).