FW: CIMB Fixed Income Monthly - Nov 2017 - Markets awaiting the rate hike

 

 

       HIGHLIGHTS

In the US Treasuries market, the Dec FOMC hike has been priced in. Hence, we see little upside to UST yields from current levels, as the Fed members remain their cautious stance in tightening path. On the flipside, we are wary of geopolitical risk (Trump-Russia link, spending bill, and North Korea missile tests) which may spur demand for safe haven assets in the near term. We currently expect the 10T to hover near 2.25% by end-Dec.

In Malaysia, our CIMB economist has revised the OPR outlook for 2018 from no change to a 25bps hike to 3.25%, possibly as early as Jan MPC meeting. We reckon that market is temporarily cushioned by foreign demand amid stronger MYR, but likely to see some selling pressure heading into Jan MPC. Hence, we see limited upside amid rate hike anticipation unless MYR continues to show strength.

We anticipate consolidation in the IDR bond market to continue in Dec as safe haven bonds remain steady. However approaching year-end, demand for liquidity and Fed tightening could negatively affect the bond market. On the positive side, BI rate cut and S&P upgrade are supporting the domestic bond market. We see the 10y bond to trade within a range of 5.8-6.6% for the remainder of 2017.

Upside risk on Thai bonds yields. 2-3y government bonds are subject to upside risk in yield amid demand observation and environmental bias toward higher rate movement   from anticipation of Dec Fed hike, improved external sentiment, and higher USD/THB. The 3y could slightly exceed our 1.60% target by end-Dec (current yield at 1.606% on Dec 4).

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

******************************************************************************************************************************************************
Privileged/confidential information may be contained in this message. If this message is received by anyone other than the intended addressee, please return the message to the sender by replying to it and then delete the message from your computer. Unintended recipients are prohibited from taking action on the basis of information in this e-mail. No confidentiality or privilege is waived or lost by CIMB Group including its affiliates (CIMB Group) by any mistransmission of this e-mail. CIMB Group does not accept responsibility or liability for the accuracy or completeness of, or presence of any virus or disabling code in, this e-mail. CIMB Group reserves the right to monitor e-mail communications through its networks (in accordance with applicable laws). Opinions, conclusions, statements and other information in this message that do not relate to the official business of CIMB Group shall be understood as neither given nor endorsed by it.

CIMB Group Sdn Bhd (incorporated in Malaysia, (Company No: 706803-D)). Registered Office: 13th Floor, Menara CIMB, Jalan Stesen Sentral 2, Kuala Lumpur Sentral,, 50470 Kuala Lumpur, Malaysia.

Visit our website at www.cimb.com ******************************************************************************************************************************************************