FW: CIMB Fixed Income Weekly - 19 Dec 2017 - Tax bill vote this week; MGS support still 4.00%; BoT signal as a short term driver

 

 

US Treasuries

• On the tax reform, the few Republican senators (Rubio, Collins, and Corker) who were initially opposed to the tax reform bill have now switched to supporting the tax legislation. The Republicans' draft of the bill aims to slash the corporate rate to 21% and is expected to go to the house and senate for a vote by this week.
• We forecast 10y UST to remain steady by end-2017 (10y US Treasuries remains below 2.40%) and to mildly steepen in 2018 via the conservative growth and inflation expectations. We forecast 10y UST to move from around 2.30% end-2017 to 2.45% by mid-2018 and to 2.65% end-2018.

Malaysia

• In the coming week, we have the Nov CPI as a fresh market driver. However, on the plus side inflation is expected to slow further to 3.4% yoy in Nov from 3.7% yoy in Nov. We continue to expect support for 10y MGS at 4.00%, and 5x5 swap spread near 20bps.

Thailand

• This week: we expect the MPC will keep the benchmark interest rate at 1.50%. However, we also await policymakers' comments especially their view on inflation which could be a very strong short term driver. Though we expect little impact on USD/THB, fixed income securities face downside risks seeing 3Q17 GDP rose above +4.0% yoy and tailwinds from exports, tourism and government spending will lend support to the economy in 2018.

Best Regards,
CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557
www.cimb.com
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