MYR govvies closed mixed, with the yield curve steeper amid thin trading flows. Secondary trading continued to see pressure from the recent active primary issuances in the

Market Roundup

• US Treasuries rallied with yields back down to multi-month lows. Risk aversion due to geopolitical worries drove flows into UST, specifically due to events such as Syria and French elections to a lesser extent. Decline in yields was only temporally disrupted as the Treasury Department sold $20 billion of the 10T in a reopening auction. The auction saw bid-cover of 2.47 times (2.66 times in 10T auction last month) and at high yield of 2.332% (there was a tail against WI 2.322%). Indirect bidders, which include those from foreign central banks, continued to be heavy at 65.2% of the amount sold.
• Overnight USD fell on a general risk-off mood on the back of the growing uncertainty over US action in Syria recently. UST yields fell while JPY and gold saw gains. The Trump Administration messaging over the Syrian air strikes have been ununiformed. Yesterday the US defense chiefs said the US objectives are limited to deterring further chemical attacks. The chiefs repeatedly said that they are not seeking regime change. This is different from the secretary of state Tillerson who said that the Assad regime is coming to an end and that Russia should withdraw its support. This in addition to the press secretary who said that Assad’s departure is a necessary long term goal.
• MYR govvies closed mixed, with the yield curve steeper amid thin trading flows. Secondary trading continued to see pressure from the recent active primary issuances in the corporate bond market. Elsewhere, flows were led by short dated papers, along with selective benchmark papers (7- and 20-year MGS).
• The Feb industrial production expanded by 4.7% yoy, above previous month’s 3.5%, but lower than consensus’s 6.1% yoy growth. The strong start to the year, driven by higher-than-expected commodity and manufactured goods exports, points to firm potential 1Q2017 GDP growth – we estimate at +4.6% yoy (+4.5% in 4Q2016).
• Thai sovereign bond yield fluctuated in narrow range of 1bp amid thin trading activities as ahead of Thailand's long holiday.  Meanwhile, the auction of LB466A may be able to create activities in the morning session supported by local investors as well as foreign players who started to reduce position in Thai bonds at Bt2.29 billion since the beginning of the week possibly to due to the preparation for this week’s auction. As global trading environment may favor bond markets from increasing geopolitical risk whilst regular buyers like insurance companies and pension funds may need long duration bonds, we expect firm demand for this auction.
• Foreign demand boosted IDR government bonds in early session on Tuesday which attracted more net buying interest in the later session. Focus was on govvies auction. Demand was solid at IDR41.9 trillion incoming bids (prior auction IDR33.9 trillion).