Republicans winning the executive office and majority in Congress have raised fears of both inflationary pressure and a sharp increase in government borrowings. The surprise election result caused heavy net selling activity before the market c

Market Roundup

• Republicans winning the executive office and majority in Congress have raised fears of both inflationary pressure and a sharp increase in government borrowings. The surprise election result caused heavy net selling activity before the market closed for the day - though there was a drop in yields beforehand on risk aversion.
• But elsewhere, as we head towards the Dec FOMC meeting, Minneapolis Fed President Kashkari who will be a voting member in 2017 quipped that Fed policy had been supporting equity and real estate prices. To us, this just reinforces notion the Fed will still hike rates if not next month then in the following months.
• Aside, the Treasury sold $23 billion of the 10T. Bid-cover was a weak 2.22x and high yield 2.020%. Indirect bidders fell to 52.2% from 62.7% prior 10T auction.
• Ringgit govvies posted mild losses on heavier trading activities Wednesday, led by sell-off in shorter dated GIIs, with foreigners selling down on the back of the weaker MYR. Notably, there was a sharp rise in overnight UST yields amid anticipation of higher inflation, which may continue to pressure MYR and bonds in the near term period, but should see local support (with easing anticipation) heading into MPC meeting later the month.
• Thai government bonds ended little changed -week. We saw volume up from Bt7.3 billion to Bt22.1 billion, in conjunction with the US election and BoT meeting. Meanwhile, USD/THB edged higher to around 35.00 late Wednesday, reacting to mild risk-off sentiment spurred by the US election.
• BoT maintained its policy rate at 1.50%, in line with expectations. Overall, policymakers noted that the economy continued to grow at similar pace close to previous assessments, despite greater downside risks on domestic and external fronts. Meanwhile, inflation would rise gradually and return to the target range later than previously expected, whilst seeing the appreciated THB weighing on economic recovery.
• Indonesian sovereign bonds were traded weaker, as market was volatile on US election day. Net selling action started to appear during polling count, and got stronger when it became clear who would win. The curve steepened as bonds in 15- to 20-year buckets weakened. However, local investor was seen support buying on 7- to 10-year tenors. We believe selective bottom fishing will be seen from here on especially in 5- to 10-year.