US Treasuries rallied with yields down 3-5bps, weighed by weaker-than-expected retail sales

Market Roundup

• US Treasuries rallied with yields down 3-5bps, weighed by weaker-than-expected retail sales number and contraction in producer prices reported on Friday. The Jul retail sales were surprisingly flat, against 0.4% gain forecasted by economists earlier. The 10T yield hit the low at 1.48%, but eventually settled higher at 1.51%, amid profit taking activities alongside upticks in crude oil prices. Meantime, the PPI fell 0.4% mom in Jul against +0.1% consensus and +0.5% in Jun. The core PPI (ex-food and energy) fell 0.3% mom against +0.2% consensus.
• Ringgit government bond market turned active, as players resumed trading following the 2Q2016 GDP report release on Friday. The 2Q2016 GDP met most economists’ forecast, coming in at decent growth of 4.0% yoy. Despite the good demand in Ringgit bonds post GDP report, Ringgit was traded a tad weaker, with USD/MYR around 4.3000 ahead of the weekend. We reckon that the broadly soft USD and recovery in crude oil will aid MYR, which eventually will spur more demand into Ringgit bonds in the short term.
• IDR govvies weakened but in a thin market with offshore interest small only on short dated bonds. Players were heard net selling on benchmark series ahead of this week’s auction of FR53, FR72 and FR73. We expect sentiment to remain weak ahead of the auctions.