FW: CIMB Market Musings - 15y MGS auction

 

 

Strong demand supported by recovery in secondary trading

Strong tender result. Secondary market has been on firmer footing recently, after the yields spiked post MPC meeting in Nov. In conjunction with improved sentiment following the recent MYR strength, the 15y MGS reopening auction received heavy demand, reflected by btc of 3.811x for the RM2.0b public tender (on top of RM1.0b private placement). It is the highest btc achieved this year, followed by 3.413x btc recorded in 10y GII auction conducted in Jan.

Possible further gains. Average yield was priced at 4.55%, within a spread of 4.532-4.563%, narrower than our expected 4.53-4.58% range. At 4.55%, the 10x15 spread remains wide at 59bps, compared to median spread of 43bps on year-to-date basis. Due to the positive sentiment, we think that there is still a potential 5bps downside for the 15y MGS in the near term period. However, we are slightly cautious that profit taking activities may emerge as liquidity shrinks heading towards year end.

Year-to-date issuances rose to RM99.5b after the 15y MGS reopening auction. According to the Economic Report 2017/2018, gross domestic borrowings in 2017 comprising MGS+GII will surmount to RM107.5, which implies that we have around RM8.0b left for the remaining three auctions.

Best Regards,

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
Find us on Bloomberg at CIMR <Go>

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