FW: CIMB Market Musings - 10y MGS auction

 

 

Poor tender result as USD/MYR ticked higher

Poor demand. The 10y MGS reopening auction surprisingly saw weak demand with low btc of 1.53x for the RM2.0b public tender (another RM0.5b for private placement). Average yield was 3.946%, within a spread of 3.890-3.988%, wider than WI 3.89/87% quoted a day prior.

Cautions ahead of risk events coupled with ease in MYR strength. In our opinion, the weak demand was partially due to the net selling pressure on short and medium tenure papers this morning amid ease in MYR strength (after the USD/MYR edging higher from yesterday's intraday-low around 4.0500). On top of that, there was caution as technically the 10y MGS yield looks likely to be well supported around 3.85%, thus limiting the potential upside in price for the 10y MGS, especially heading into year end.

We think that it is fairly priced at 3.95%, looking at the 51bps 3x10 spread, which is near the median spread of 52bps since mid-Aug. Assuming USD/MYR remains stable near current levels, we expect the 10y MGS to move sideways between 3.90-4.00% in the near term period, but bias towards net selling pressure pending NFP release and Dec FOMC.

Best Regards,

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
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