US Treasuries strengthened with yields down across the curve, reacting to Trump’s comments on Tuesday. The US president-elect said that the Congress bord

Market Roundup

• US Treasuries strengthened with yields down across the curve, reacting to Trump’s comments on Tuesday. The US president-elect said that the Congress border-adjustment tax plan is “too complicated”, whilst he also signaled that the USD appeared to be too strong. As for economic data, empire manufacturing registered at 6.5 for the month of Jan, lower than consensus 8.5 and previous month’s 7.6. Upcoming highlight will be inflation and industrial production scheduled on Wednesday.
• As for Fed-speak, NY Fed’s Dudley said dollar strength contains import prices and that with contained inflation Fed tightening will not deter economic expansion. Also, governor Brainard said gradual tightening is possible with low inflation but unless fiscal policy does not boost the economy in a major way.
• GBP/USD rebounded and closed at 1.2414. GBP shot up in reaction to UK PM May’s Brexit speech, who said UK will not seek a half-in, half-out relationship with the EU. Out of the Union, the UK will no longer abide by free movement of labor and not subject to the European Court of Justice. The UK will seek a customs union so facilitate trade with the EU but without having to impose the same duties on non-EU countries. In addition the UK will negotiate deals with other countries, will seek transitional agreements for financial services while the new rules are phased in.
• Ringgit govvies closed mixed on Tuesday. Trading interest remained muted with daily volume recorded at RM1.2 billion, heading into risk events such as MPC meeting on Thursday (and Trump’s inauguration Friday). Aside, MYR saw slight recovery against USD, guided by the broadly weaker USD. Elsewhere, economists anticipate the Dec CPI to inch higher to +1.9% yoy, from +1.8% yoy a month earlier.
• Thai government bond pared losses, while flows were heavier totaling Bt16.0 billion, up from Bt8.4 billion registered on Monday. Meanwhile, trading activities remained concentrated on shorter dated papers with maturities up to around 5 years. On the other hand, THB was dealt firmer against USD, weighing the USD/THB lower to 35.27. Further downside may test 35.00 in the near term period amid broadly weaker USD.
• Indonesia's government bond market was traded up on auction day, with net buying in short-term bonds up to 5 years. Yield of 1-year papers fell by 20bps, following the bond auction that was seen as a huge success. MoF received IDR53.7 trillion incoming bids while the target was only IDR15 trillion. Moreover, the incoming bids for 3m and 12m SPN bills reached IDR37.6 trillion (70% from total incoming bids). The government upsized the issuance to IDR20.35 trillion, with bid-to-cover ratio for 3m and 12m SPN bills at 4.08x and 3.44x, respectively. The market was traded up after the auction results, where 2-5 year bonds were lifted, causing yield curve to bull steepen. Volume leaped to IDR13.6 trillion and concentrated on bonds maturing in over 10 years (66%).