FW: CIMB Fixed Income Weekly - 31 Oct 2017 - External drivers to guide MYR, IDR bonds; THB bonds likely to get domestic data boost

 

 

US Treasuries

• This week's incoming drivers for the bond market include FOMC decision, data including Oct NFP, ISM manufacturing and services, as well as anticipated Trump nomination for Fed chief. FOMC is expected to hold rates but statement may go either way. NFP is expected to show a firmer number (+310k in Oct versus the hurricane influenced-33k in Sep), but ISM data may disappoint. In addition, Fed chief nomination is still speculative.
• All in, we expect mixed performance in UST this week. Major resistance level remain pretty high near 2.50%, and we expect 2x10 spread remaining >80bps.

Malaysia

• We expect cautious movement in MGS yields this week, but demand may focus on short dated papers as we think offshore interest could stand firm. We continue to foresee consistent 3x10 and 5x10 spreads in range (>50bps and >30bps respectively).
• The Prime Minister unveiled the government's Budget 2018 whilst indicating the 3.0% fiscal deficit to GDP for 2017 remains on track. This is equivalent to a deficit financing of RM39.9 billion in 2017, and leads to gross domestic borrowing requirements of RM107.5 billion (inclusive of refinancing of maturing government bonds). Year-to-date MGS+GII gross issuance is already RM93.5 billion, which leaves a pretty light RM14.0 billion more to be issued this year in the remaining five auctions.

Indonesia

• 10y bonds expected to increase to 6.90% this week – to follow movement in 10y US Treasuries (spread between the two had gapped much tighter in past two years).
• As an aside, we do note that correlation between 10y IDR government bonds and 10y UST is not strong in past two years (correlation less than 10% in our calculation), but the correlation between the 10y IDR government bonds against foreign holdings is clearer.

Thailand

• We expect yields will shift lower at the back of the curve (bids were felt along 9-10ys tenor at market open this week with yields about 2bps lower). We expect market correction along 9y and 10y tenors to continue and to meet target of 2.31% and 2.45%, respectively.

Best Regards,
CIMB Treasury & Markets Research
Tel: +603 2261 8557
www.cimb.com
Find us on Bloomberg via CIMR <Go>

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