Malaysia: MGS curve bear-steepened with more pressure seen in the ultra-long sector as yields rose 12-17bps MoM along the 15y30y. We m

MY & SG Bond Market Watch

·         Malaysia: MGS curve bear-steepened with more pressure seen in the ultra-long sector as yields rose 12-17bps MoM along the 15y30y. We maintain our tactically mildly bearish outlook on MGS, with a view that BNM to keep OPR unchanged in November which limit MGS curve from going lower, and market remains vigilant against external uncertainties amid recent steeping of core sovereign curves in developed markets. Our target yield for the 10y MGS is unchanged at 3.65-3.70% by end-2016.

·         Singapore: SGS curve bear-steepened due to underperformance in the 10y30y part rising 15-20bps MoM. MAS released the 2017 SGS issuance calendar. We estimate a lighter gross supply of SGD14.1b in 2017, down from SGD18.8b in 2016 on lower refinancing need. In October policy meeting, MAS maintained the SGD NEER slope at zero percent and the width of the policy band was unchanged. Looking ahead, we expect some stability in the domestic short-term rates 3M SIBOR and 3M SOR, but with a slight upward bias trajectory as the future-implied probability of US FFR hike in December is currently at 71.4%, meaning further re-pricing may be needed, but not excessive.