FW: CIMB Daily Fixed Income Commentary - 28 Aug 2017 - Little direction from Jackson Hole / Regional bonds busy with primary

 

Market Roundup

• US Treasuries extended gains as players doubted Fed's tightening pace after its chair Yellen provided no indication on the policy stance at the Jackson Hole meet. On the other hand, ECB president Mario Draghi stated that they are confident that "as the output gap closes, inflation will continue to converge to its objective over medium term." However, he said that there is still a long way to go and large degree of accommodation is still warranted.
• Expectations over the Jackson Hole conference came to naught as both Yellen and Draghi offered little information on the direction of monetary policy in the coming months. Yellen mainly spoke about the need to maintain the post-financial crisis regulation regime while Draghi spoke about the importance of trade. Sentiment surrounding USD was decidedly negative as EUR saw consecutive moves higher when either of the central bankers spoke. The first move brought EUR up to 1.1850 followed by the second move when Draghi spoke bringing it to reach 1.1950.
• Malaysia: Malaysian sovereign bonds strengthened a tad on Friday. Bank Negara Malaysia announced details for the reopening auction of 7-year GII. Public tender comes at size of RM3.5 billion whilst there will be another RM500 million to be privately placed. WI was heard at 3.99/97%, offering 10-12bps against 7-year MGS. This level should be attractive enough to attract demand by the time the auction closes on Tuesday. Expect MYR bonds to be supported after lacklustre tightening indications provided at Jackson Hole. However, we expect players to turn cautious heading towards MPC on 7 Sep.
• Thailand: Govvies curve flattened led by gains in the long-ends and mid-ends with yields falling 1-2bps mostly from sizable buying flows of Bt10.30 billion from BoT open market operation (OMO). On the other hand, foreign investors were still net sellers of Thai bonds, for a third consecutive day, at Bt2.31 billion amid local political concerns and ahead of Jackson Hole. Local political risk was contained after the court ruling on G2G case found Boonsong's guilty with 42-year jail term punishment and ex-PM Yingluck did not appear to the court. Looking ahead, LB666A auction should receive well demand from insurance companies and long-term investors with first target at 3.5% as the size is small at Bt 7.0 billion relative to market demand.
• Indonesia: IndoGBs was biddish as BI looked to lower its term structure as it auctioned 9m and 12m SDBI auction with IDR5.0 trillion target (incoming bids reached IDR25 trillion). Ultimately, BI issued a total 11T. Players in the bond market reacted by buying benchmark bonds along all tenor. The 10-year FR59 fell 9 bps to 6.74%.

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