US Treasuries weakened amid stronger than expected industrial production and housing data

Market Roundup

• US Treasuries weakened amid stronger than expected industrial production and housing data releases and players reacting to New York Fed president Dudley remarks that the Fed is closer to hiking rates and the UST strong valuations should be a concern.
• US housing starts was 1211k in Jul against 1180k earlier forecast estimates whilst US industrial production rose 0.7% mom in Jul versus 0.3% consensus.
• Overnight, USD lost ground against the Euro amid stronger economic signals out of the Euro Zone. The ZEW institute’s monthly survey, the zone’s economic sentiments improved in Aug to a reading of 4.6 from -14.7 the month before. Aside, the Euro Zone's trade surplus widened €29.2 billion in Jun from €24.6 billion in May. However, this morning, USD was showing some strength after overnight pretty hawkish Fed-speak, especially from New York’s Dudley.
• Malaysian sovereign bonds further strengthened on the back of easing speculation, whilst sentiment was aided by firmer Ringgit, as USD/MYR hovered at 3.9850 late Tuesday. Apart from that, we saw some demand in longer dated papers including MGS Jun’31 and May’35, as well as GII Sep’30.
• Thai government bond yields were dealt marginally weaker, along with higher IRS rates on Tuesday. Flows improved but remained thin, as daily volume increased from Bt7.4 billion to Bt10.9 billion, led by trading interest in LB176A (Bt7.8 billion). With the better-than-expected 2Q2016 GDP report, we expect only mild interest into bonds in the short term period.
• IDR government bonds were mostly traded in a tight range ahead of the debt auctions Tuesday. However, yields rose post-auction which saw the government upsizing the auction size to IDR37 trillion. Bids appeared strong at first but overall demand was muted in view of the larger size - bid-to cover ratio for FR73 was 1.36 times and FR72 was just 1.07 times. Foreign interest was later seen to bring the market to an overall steady close.