US Treasury yields were initially lower, weighed by profit taking pressure in stock markets on Monday, but the curve eventually moved higher and steepened, adjusting to the strong rate hike anticipation. Based on Fed Funds futures trading, there is a 96.0% probability f

Market Roundup

• US Treasury yields were initially lower, weighed by profit taking pressure in stock markets on Monday, but the curve eventually moved higher and steepened, adjusting to the strong rate hike anticipation. Based on Fed Funds futures trading, there is a 96.0% probability for the Fed to raise rate at this month’s FOMC meeting, in contrast to 50.0% over a week ago.
• With FOMC up ahead, focus this week will be on NFP this Friday, where consensus sees job creation of 190k for the month of Feb. We think that the UST is likely to be pressured this week, amid cautious stance heading into NFP release as well as FOMC meeting 15 Mar. Assuming a Fed hike this month, we see the yields to grind a tad higher, with 10T probably moving towards the range of 2.60-2.70% for the rest of the month.
• Ringgit government bonds were surprisingly firmer in conjunction with lower IRS rates, tracking late strength in UST last Friday. Meanwhile, we heard offshore players showing improved demand for Ringgit bonds on Monday. Total trading volume was heavy at RM6.3 billion, led by short dated Mar’17 and Mar’18.
• Thai bond market was quiet as outright trading activities decreased 19.67% to Bt89.71 million on Monday and yield saw small fluctuation within less than 1bp extent.  Sell-off in the bond market paused as the market was in wait and see mode. US jobs report on Friday will be a mover as it would be the final evidence for the Fed to make rate decision on Mar 15.
• Indonesian government bonds yield curve moved down in parallel on Monday on the back of offshore inflows. Most of the activities happened after the break. in general market was biddish with activities centered on the bellies and longer end of the curve. Indonesia’s MoF will be holding a Syariah bond auction today with IDR6 trillion target, we think demand will be solid especially on 6-month SPNS bills and PBS bonds up to 5-year tenors. Volume improved to IDR12.5 trillion and dominated by bonds maturing in over 10 years (42%).