US Treasuries weakened in a bear-flattening move amid steady economic data as well as ahead of Trump’s address to congress where he is expected to talk about his fiscal plans. Fed-speak from San Francisco Fed president Williams, who said a hike will receive serious consideration at the Mar FOMC, boosted yields also.

Market Roundup

• US Treasuries weakened in a bear-flattening move amid steady economic data as well as ahead of Trump’s address to congress where he is expected to talk about his fiscal plans. Fed-speak from San Francisco Fed president Williams, who said a hike will receive serious consideration at the Mar FOMC, boosted yields also.
• Fed funds futures trading continued to price in higher probability of hike at the upcoming FOMC meeting, at 52.0% on Tuesday from 50.0% Monday and from 44.0% middle of Feb. The 4Q2016 GDP came out at 1.9% qoq annualized or below consensus of 2.1% and similar to first estimate reading. Dragging 4Q2016 GDP was muted business investments. However, the Conference Board consumer confidence index trekked higher to a reading of 114.8 in Feb versus consensus 111.0 and previous month’s 111.6.
• Ringgit govvies were traded weaker awaiting President Trump’s speech, as well as MPC meeting scheduled for 2 Mar. Daily volume was slightly heavier at RM2.2 billion, in contrast to RM1.9 billion garnered on Monday, led by shorter term papers.
• In the Thai sovereign bond market, the bellies underperformed with 2bps increase within the 2- to 9-year tenors possibly due to supply pressures and higher UST yields.  The auction of 5-year LB226 coupled with greenshoe option will add supply in the primary market with totaling issuance size of Bt30 billion. Client wise, we anticipate sufficient demand to support LB2226 when the bond traded in higher range of 2.23%-2.24%.
• On bond auction day, the Indonesian government received a healthy IDR35.3 trillion incoming bids. Issuance target was IDR15 trillion, and while the government can upsize up to IDR22.5 trillion (max 50% from target), they opted to issue only IDR16.35 trillion, might be to maintain demand for future auctions, plus there will be added supply anyway from 3-year SR09 issuance in Mar. Overall IndoGB looks biddish post-auction, both net buying flows and short covering interest were seen in 5-10-year benchmarks. There were also keen net-buying in the 15-20-year space. Volume doubled to IDR15.2 trillion, dominated by bonds maturing over 10 years (46%).