FW: CIMB Fixed Income Weekly Commentary - 18 Sep 2017

 

·        US Treasuries
o        Short 2T and 10T in a curve steepener. We maintain curve steepener to short both 10T and 2T with 2x10 target spread at 90bps.
o        Bond markets should have little to be cautious about FOMC despite anticipated plan for QE reversal. For one, the Fed is not expected to sell down its holding of UST or agency debt; it will merely not reinvest maturing assets. Plus, the Fed will start small and will gradually increase its tapering towards a cap of $30 billion in UST holding reduction and $20 billion agency bonds per month.

·        Malaysia govvies
o        Long 5-7y GII. We remain overweight MGS and MYR (our Macro Outlook Strategy 25-Aug-17). However, short term period we are more positive Islamic GIIs for immediate trading gains.
o        Long 5y IRS. We bring attention to the lagged movement in swaps vis-à-vis MGS. For medium term strategy, consider Long 5-year IRS and Short 5-year MGS with target spread 15bps (21bps last week).

·        Thailand govvies
o        Long 5y IRS. With fading global risk aversion, we bias on the upside of THBIRS rate with 5-year target at 1.80%-1.85% area.

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