Amid firm demand at the 7-year auction and large fall in new home sales, US Treasuries closed Thursday with mild gains. The $28 billion auction of the 7-year Treasuries saw a lower bid-cover of 2.45 times versus 2.51 times average of six 7T auctio

Market Roundup

• Amid firm demand at the 7-year auction and large fall in new home sales, US Treasuries closed Thursday with mild gains. The $28 billion auction of the 7-year Treasuries saw a lower bid-cover of 2.45 times versus 2.51 times average of six 7T auctions since last July, but there was strong demand from indirect bidders (which include foreign central banks) as they ended up with 72.8% of the amount sold (64.0% at the 7T auction last month). High yield at the auction was 2.335% (2.284% at 7T auction last month).
• USD rallied with DXY now up to 100.38 as the greenback rose against the Yen and Euro especially. EUR was pressured as European bond yields rose with the Italian court ruling that could pave way for an early election. The ruling allows a clear parliamentary majority to any party winning 40% of the votes, which means a need for a coalition government (as Italian parties are mainly small) and lowers chances of a thoroughly populist coalition government to take control.
• MYR IRS kept rising as it tracked higher UST yields overnight. We think pressure remains for upwards movement but should be contained in next couple of weeks if as expected FOMC does note hike rates at upcoming policy meeting. Amid the higher swap rates, MGS were dealt mixed downplayed by thin liquidity heading towards long CNY break.
• Thai bond curve steepened as yield rose 2-3bps along the mid- to long-end tenors mainly due to net selling pressure by foreign players in the late trading session and seconded by local selling. Yields were under upward pressure amid strong appetite for global equity markets and the SET index managed to close higher at 1,591 on Thursday. Onshore IRS curve also shifted in a bear-steepening move as swap rates for 4 year tenor and over edged higher 4-8bps.
• IDR government bonds were traded down Thursday in line with UST movement (10T above 2.50%). The market opened unchanged on aggressive bids but some net selling pressure appeared later in the day. Volume traded increased to IDR12.6 trillion and as usual was concentrated on bonds maturing over 10 years (41% of flows).