For the month of Nov, we see the US Treasury yields to consolidate a tad after the surge in Oct, as players have very much priced in a Dec rate hike. While the yields may remain at the high ranges in the coming weeks, we see the 10T yield to be capped at 1.92%.

• For the month of Nov, we see the US Treasury yields to consolidate a tad after the surge in Oct, as players have very much priced in a Dec rate hike. While the yields may remain at the high ranges in the coming weeks, we see the 10T yield to be capped at 1.92%.
• Malaysian sovereign bonds weakened in conjunction with a global bond rout in Oct. Aside, sentiment is expected to remain guarded heading into US presidential election scheduled 8 Nov. However, we noted mild bargain hunting since late Oct, whilst the response to the new year’s budget was so far more on the positive side due to the federal government’s commitment of continued fiscal consolidation. While Ringgit bonds were weighed by recent weakness in Ringgit and crude oil, going forward, we believe that sentiment will turn more bullish post US presidential election, as market still looking at a possible rate cut by Bank Negara at MPC meeting slated for 23 Nov.
• The Oct CPI recorded at +0.34% yoy, lower than consensus +0.40% and Sep +0.38% yoy, but appeared to be firm in contrast to the first half of this year. GDP growth was reported at +3.20% and +3.50% yoy for the first and second quarter of this year, higher than +3.00% and +2.70% yoy a year before. Hence, while economic activities continue to pick up, we reckon the BoT will not rush for any easing measure at anytime soon. Players generally anticipate the central bank to stand pat on its monetary policy stance. Apart from recent headwinds driven by Fed hike expectation, we expect sustained longer term pressure on fiscal borrowing side, as the 2017 fiscal budget shows a larger total of Bt1.56 trillion debt management plan for FY2017, versus Bt937 billion as per announcement for FY2016 made last year. We see the 10-year benchmark yield to move higher to the range of 2.20-2.25% in Nov.
• We anticipate IDR bond market to strengthen in Nov. Low inflation, successful tax amnesty program, stronger Rupiah and also anticipations of a seventh rate cut by BI should support the bond market. On the flip side, an interest rate increase by Federal Reserve could be negative to government bonds though temporarily. We forecast the 10-year bond to end the year at 6.25%.