US Treasuries rallied as risk appetite took some beating upon weak reading in the ISM services index for Aug (weakest since Feb 2010) which added to pressure from last week’s weak ISM manufacturing index reading and weaker-than-expected non-farm payrolls. Probability

Market Roundup

• US Treasuries rallied as risk appetite took some beating upon weak reading in the ISM services index for Aug (weakest since Feb 2010) which added to pressure from last week’s weak ISM manufacturing index reading and weaker-than-expected non-farm payrolls. Probability estimates for a Sep FOMC meeting rate hike from futures trading was 24.0% as at 6 Sep, down from 32.0% last Thursday (2 Sep 2016).
• Our economist believes that there will probably be one rate hike in 2016, probably in Dec, though the balance of risks suggests that it may be implemented even later – US GDP growth is expected at a hardly-robust 2.0% in 2016.
• US Dollar further weakened against other major currencies with Asian fx showing strength, as markets saw weaker US data namely the ISM non-manufacturing index falling to a reading of 51.4 for the month of Aug from 55.5 in Jul and lower than earlier consensus forecast of 54.9. This added to US growth worries after last week’s ISM manufacturing index came out at reading of 49.4 for Aug against 52.6 Jul and consensus of 52.0.
• EUR/USD was around 1.1167 this morning. The third official estimate of Euro Zone 2Q2016 GDP was +0.3% qoq (or 1.6% yoy) versus +0.6% qoq in 1Q2016. But the Euro Zone retail purchasing managers' index surged to 51.0 for Aug from 48.9 in Jul.
• Ringgit govvies posted little gains heading into MPC meeting scheduled Wednesay, amid speculations of easing by the central bank. However, we noted that players are generally expecting the OPR to be maintained at the current level. Therefore, we think that the bond yields will be pressured lower substantially if it turns out to be a rate cut.
• RAM revised Media Prima Berhad’s rating outlook from Stable to Negative, reflecting its concerns on the deterioration of business profile amid great competition and weaker consumer sentiment. The company’s TV networks’ revenue declined for the past two financial years, but saw marginal improvement on yoy basis for the period ended 30 Jun 2016. On the flipside, the second largest revenue contributing segment - print media continued to register declining revenue since FY2013. Despite the more challenging environment, we are not too pessimistic as we do not expect a steep deterioration in its business profile in the short to medium term. Meanwhile, the balance sheet remains healthy with low borrowing of RM300 million maturing Dec 2017 (D/E ratio at 0.18x), whilst the company has launched a new retail home shopping business to mitigate contractions in revenue.
• Thai govvies were dealt slightly firmer Tuesday, although sentiment remained cautious. Elsewhere, USD/THB moved higher to test 34.80 in the earlier session, but subsequently dipped lower to around 34.61 late Tuesday.
• Indonesian government bonds market was very quiet on Tuesday, with little movement as almost all market players were sidelined on Syariah auction day. MoF targeted to issue IDR4 trillion in the auction but decided to upsize the issuance to IDR6 trillion as the auction was oversubscribed, with incoming bids of IDR13.4 trillion. Secondary volume fell to IDR6.4 trillion and was dominated by bonds maturing in over 10 years (36%) and bonds maturing between 1 and 5 years (30%).