The ECB kept its deposit rate at -0.40%, its main refinancing rate at zero and the marginal lending rate at 0.25%. The central bank revised lower its 2017 inflation forecast to 1.5% (from prior forecast 1.7%. Policymakers said interest rates will remain at present levels and ‘well past’ the period of its asset purchases program.

Market Roundup

• US Treasuries weakened mildly with benchmark yields seen 0-2bps higher even as dovish ECB comments after its policy meeting sparked lower yields in Europe. A couple more event risks are awaited, namely the UK election and next week’s FOMC meeting.
• The ECB kept its deposit rate at -0.40%, its main refinancing rate at zero and the marginal lending rate at 0.25%. The central bank revised lower its 2017 inflation forecast to 1.5% (from prior forecast 1.7%. Policymakers said interest rates will remain at present levels and ‘well past’ the period of its asset purchases program.
• Malaysia: Malaysian sovereign bonds continued to move sideways ahead of risk events. Sentiment was not aided by slightly weaker MYR, as USD/MYR inched up to 4.2680. On the other hand, trading activities registered heavier flows with daily volume up from RM3.7 billion to RM4.9 billion on Thursday.
• Thailand: Yields moved sideways in cautious trading ahead of UK election, ex-FXI Comey testimony, and ECB meeting. Profit taking pressure was felt along the belly mainly at LB21DA, 226A, 25DA, 267A, 26DA with yield rising about 1-2bps, in line with higher UST yield from some relieved political concern around the White House. Meanwhile, long-term bonds especially LB446 and LB466A further gained after the firm auction of LB466A. Foreign investors sold both short- and long-term bonds at Bt7.80 billion and Bt1.47 billion and further reduction in Thai bond will strengthen our confidence that most bond yields currently traded (around 2017-low) is about to find bottom and may stage into sideways movement at the second half of Jun pressured by the FOMC meeting on Jun 13-14 and the bond switching program.
• Indonesia: Bonds were traded sideways on low volume ahead of ECB meeting and UK election. Light net-buying activity was seen on the 10e-year benchmark, but was eagerly met by some profit taking activity. Some trimming of positions on the 20-year benchmark were also seen, but traded was reportedly pretty small. On the data front, Indonesia's May foreign reserve was $124.95 billion, higher compared to previous month of $123.25 billion. Market volume was steady amounting IDR13.4 trillion and evenly shared between short and long tenors.