US Treasuries weakened in the earlier session Thursday but eventually reversed losses

Market Roundup

• US Treasuries weakened in the earlier session Thursday but eventually reversed losses following the release of softer-than-expected ISM manufacturing index. The Aug reading came at 49.4, against consensus 52.0. On the other hand, initial jobless claims were pretty much in line with market expectation and registered at 263k as at 27 Aug, in contrast to 265k forecasted earlier. Upcoming highlight will be on the non-farm payrolls on Friday, where market anticipates total job gains of 180k for the month of Aug.
• Regional currencies were moving in range against USD ahead of the non-farm payrolls report. MYR was under pressure alongside the declining crude oil prices, with USD/MYR settled above 4.0800 on Thursday.
• Malaysian government bonds closed barely changed Thursday despite opening on weak form amid higher USD/MYR (>4.0700) and lower crude oil price (below $45 per barrel. However, bids came in later in the day, which we think points to expectation of lower interest rates going forward. The next Bank Negara MPC meeting is scheduled for 7 Sep.
• Thai government bonds posted mild gains, mostly slanted along the longer portion of the yield curve. Sentiment was guarded ahead of the NFP data release Friday, whilst on the domestic front, players took in another set of relatively weak inflation indicators. The Aug CPI showed a 0.29% yoy increase against +0.43% consensus but higher than +0.10% yoy showing in Jul. Core CPI was in line with expectation at +0.79% (0.80% consensus) and slightly higher than Jul’s +0.76%.
• IndoGB strengthened on weak CPI data release. The Aug CPI was +2.79% yoy, lower than +3.02% consensus and +3.21% previous month (+0.02% mom versus +0.02% consenus and 0.69% prior month) raising the speculation that another rate cut is coming. Offshore banks continued their net buying interest  while local investors were also more biddish compared to Wednesday. Volume traded increased to IDR14.5 trillion and dominated by bonds maturing in over 10 years (54%).