US Treasuries added further but mild gains Tuesday as crude oil prices fell and USD

Market Roundup

• US Treasuries added further but mild gains Tuesday as crude oil prices fell and USD strengthened. There was also relief for Treasuries upon poor showing by Donald Trump in his first presidential debate with Hillary Clinton – a win for the Republican Trump in the upcoming election, in markets’ eyes, is harbinger for wider US budget deficits. Brent crude fell to around $45.60 per barrel Tuesday after reaching above $47.50 the day before. In economic data, the Case-Shiller 20-city index rose by a smaller 5.02% yoy in Jul against +5.11% the month before, but the Conference Board consumer confidence index rose to a reading of 104.1 in Sep, or the highest since outset of the financial crisis.
• USD showed strength with the DXY around 95.66 overnight but fell to around 95.426 as Asian markets opened this morning. USD was especially firmer against EUR. The Euro Zone’s M3 supply expanded 5.1% yoy in Aug against +4.8% in Jul. USD was steady against CAD (1.3212 this morning versus 1.3042 last Friday) but weaker versus the Mexican peso on the back of poor showing by Trump at Monday night’s presidential debate.
• Fed vice chair Stanley Fischer says the sharp decline in labor force participation rate is not a symptom of the Great Recession (weak labor predates the crisis), which he suggests that there is less slack in the US economy than what the Fed thinks. Fischer expects wage growth of 2% in 2016.
• Ringgit govvies strengthened, riding the firmer Ringgit on Tuesday. USD/MYR dipped below 4.1200 but eventually erased most of the losses and settled at 4.1255. Meanwhile, Bank Negara Malaysia announced the reopening auction of 20-year GII, which will come with an issue size of RM2 billion. WI was quoted around 4.31/20%.
• Thai govvies were dealt firmer, alongside the stronger THB. USD/THB continued to slide lower and hovered at 35.58 late Tuesday. The bond market appeared to be better supported at this juncture, as sentiment improved post FOMC. However, we think that gains may be capped ahead of trade data slated for this Friday. Elsewhere, foreign players recorded heavy net buying amount totaling Bt20.7 billion on Tuesday.
• Indonesian government yield curve rose 2-3bps on auction day, when the government received IDR19.7 trillion incoming bids, and decided to issue IDR14 trillion worth of bonds, or IDR2 trillion higher than target. The market was traded in range after the auction announcement until closing, with both locals and foreign names were active in the market. Volume traded doubled to IDR26.4 trillion and was dominated by bonds maturing between 5 and 10 years (36%).