US Treasuries further weakened, reacting to the improved risk-on sentiment amid increased expectation that UK will remain in the European Union.

Market Roundup

• US Treasuries further weakened, reacting to the improved risk-on sentiment amid increased expectation that UK will remain in the European Union. Stocks closed higher, with DJIA up 0.73% to 17804, whilst Brent crude oil surpassed $50/bbl and settled at $50.65/bbl on Monday. We think that the anticipation of new supplies in Treasuries ($88 billion) this week also prompted some profit taking pressure, particularly on shorter dated papers.
• Malaysian government bonds closed mixed, with flows concentrated on shorter dated papers namely MGS Jul’16, Sep’21 and Oct’17. In our opinion, gains were led by recovery in crude oil prices and MYR, as risk-off sentiment eased amid increased speculation that UK will remain as part of the European Union.
• MYR corporate bond market continued to be well-supported. Investors were seen tapping on higher yielding papers in the AA segments, including JEP, MEX II and UEMS. On top of that, medium- to long-dated papers (EKVE and Telekom) on the AAA curve also saw decent demand and closed up to 3bps lower. Expect yield hunting interest to sustain in the short term period.
• THB denominated government bonds were dealt a tad weaker, paring gains garnered ahead of last weekend. Elsewhere, USD/THB edged lower from the higher end near 35.35, and hovered at 35.20 late Monday. We think that Thai govvies are likely to move within narrow ranges amid cautious sentiment ahead of MPC meeting scheduled on this coming Wednesday. Players generally expect BoT to hold rate at 1.50%.
• It was quiet day for the Indonesian sovereign bond market which closed largely unchanged. Players preferred to wait and see ahead of the upcoming Brexit vote and also the Tax Amnesty Bills parliament process. We think demand at the upcoming bond auction will also be mild given the uncertainties ahead. Volume decreased to IDR7.3 trillion and was dominated by bonds maturing in over 10 years (57%) and money market (18%).