US Treasuries pared losses to close mildly weaker on Tuesday. There was little in US economic data but there was data out of Europe and some pickup on USD strengt

Market Roundup

• US Treasuries pared losses to close mildly weaker on Tuesday. There was little in US economic data but there was data out of Europe and some pickup on USD strength due to concerns over Le Pen’s rising likelihood of victory in early French elections. Sentiment was boosted by firm demand at the 2T auction but dampened as Philadelphia Fed’s Patrick Harker (FOMC voter) called for three rate hikes this year.
• Dollar strength against the Euro on technical trading came amidst French election worries. The Euro fell sharply against the Dollar in the first half of morning trading here resulting in the ringgit breaking briefly above 4.4600. The Euro which has been under French election worries pressure broke through technical levels which generated selling and pushed in lower. The Euro continued falling at the open of London trading after it failed to recover above 1.0580 after initially falling below that level. A further move below 1.0560 generated another round of selling to push it to reach the weeks lows.
• Focus will be on FOMC meeting minutes slated for 23 Feb this week, which may provide clearer signal on the timing for next rate hike by Fed.
• Malaysian sovereign bonds were dealt mixed on Tuesday. There were light profit taking activities following recent gains, but sentiment remained positive especially if we look at current valuations. However, we are slightly cautious ahead of releases later this week. Apart from US FOMC minutes, near term catalysts will be the announcement of 30-year reopening MGS, along with the CPI and foreign reserves data releases.
• In Thailand, the government yield curve was steady and bonds were traded in a quiet mood and fluctuated in a tight range after auction of GGLB197A and Thailand’s GDP report on Monday. At the same time, we see some bidding interest on LB196A amid speculation that this bond will be used as source bond for the switching program in 2017. Next macro mover is the Fed's minutes on Thursday. Separately in the swap market, 5-year IRS rate traded up to 2.21% as ND players interest leaned to the paying side after UST was under selling pressure.
• IndoGB were traded down on auction day, opening in offerish tone, in line with biddish USD against Asian currencies. Transactions mainly focused on on-the-run series, mostly by banks. MoF held a Syariah bond auction with IDR6 trillion target but only managed to get IDR10.4 trillion incoming bids, quite low compared to the last Syariah auction (IDR19.4 trillion). The government upsized the issuance by IDR15 billion only to IDR6.015 trillion. Market volume decreased to IDR11.5 trillion and dominated by bonds maturing in over 10 years (44%).