US Treasury yields edged higher. As widely expected, the Fed held rates unchanged at the range of 0.75-1.00% in May FOMC meeting, but held a confident view of the economy – viewing the slower growth in first quarter as transitory. Policymakers especially noted that business fixed investment firmed (no qualifying words like ‘somewhat’ firmed) and that the job market continued to strengthen, and inflation c

Market Roundup

• US Treasury yields edged higher. As widely expected, the Fed held rates unchanged at the range of 0.75-1.00% in May FOMC meeting, but held a confident view of the economy – viewing the slower growth in first quarter as transitory. Policymakers especially noted that business fixed investment firmed (no qualifying words like ‘somewhat’ firmed) and that the job market continued to strengthen, and inflation continued to run ‘somewhat’ below 2 percent. The central bank sees near term risks to economic outlook to be ‘roughly’ balanced, and is expected to continue raising rates gradually going forward. According to Fed funds futures trading, market is now seeing 90.0% probability that the Fed will raise rate in Jun FOMC, in contrast to 59.1% implied a day prior.
• MYR government bonds continued to strengthen on Wednesday, despite broadly stronger USD in the later session, possibly due to cautious stance awaiting FOMC. The new 30-year GII auction was announced with an issue size of RM2.5 billion (including RM500 million private placement). WI was heard bidding at 4.95%.
• Elsewhere, players will be eyeing on Malaysia’s trade numbers slated for this Friday. Consensus sees exports and imports to grow at 20.0% and 28.6% yoy in Mar.
• Thai sovereign yield curve was in bull-flattening mode and the yield for long-term segment fell 1-7bps. Demand for bonds strengthened after headline CPI slowed to 0.38% yoy in Apr and investor lowered bets on hawkish tone in the FOMC statement after weak US GDP in 1Q2017 and core PCE in Mar.  In addition, foreign demand in long-term bonds remained solid as net buy positions was Bt6.89 billion on Wed while foreigners sold short-term bonds (-Bt1.75 billion). Thus, the auction of Bt20 billion 10-year LB26DA was able to attract demand with 1.84 bid-to-cover ratio and lower average bidding yield at 2.74%, 3bps lower than previous auction on Mar 22.
• IndoGBs were traded in a tight range again on Wednesday, continuing previous day's sideways movement. Local PFs was seen buying short dated bonds up to 3 years, and elsewhere, transactions were dominated by bonds in 10-15-year buckets. Volume leaped to IDR19.8 trillion - of these 31% were bonds maturing in between 1 and 5 years and 34% maturing in over 10 years.