US Treasuries fell on Tuesday amid release of upbeat economic data, namely the Conferenc

Market Roundup

• US Treasuries fell on Tuesday amid release of upbeat economic data, namely the Conference Board’s consumer confidence index which surged to a reading of 125.6 in the month of Mar from 116.1 in Feb. Elsewhere, Fed vice chair Stanley Fischer shared his view that two more rate hikes this year would be appropriate. That would take the upper bound of the FFR to 1.50% - exceeding the 2T around 1.25% currently.
• MYR government curve steepened on Tuesday, amid concerns over inflation and talk of possible Bank Negara rate hike. However, we maintain that economic growth remains at risk given external uncertainties and risk to domestic demand. This means talk of a rate hike is premature. CIMB’s house view remains the OPR at 3.00% till end-2017. We believe Bank Negara will tolerate inflation at levels below 4%, as drivers are mainly cost-induced.
• Gains in Thai govvies securities began to halt as players look towards MPC meeting and LB666A auction both due Wednesday. Profit taking pressure was seen near the bellies of the curve (from asset managers and local banks) but foreign inflows continued towards bonds maturing in 7 years or longer. We agree with the market the MPC will stay pat at 1.50% as price pressures remain subdued and Trump's policy together with political risks in Europe seems to increase downside risk to growth especially in the exports sector. Thus, we will pay a great deal of attention to the MPC statement (especially comments of on the strong baht). If the MPC tone is dovish meaning expressing a concern of the impact of a weak baht to the economy, we expect bonds will see a bull flattening pattern. That said, the auction of LB666A (last trade at 3.74%) should draw solid demand with potential lower bids near 3.71%-3.72% if MPC leans dovish.