FW: CIMB Fixed Income Daily - 04 Jan 2018 - Fed unsure on the real impact of tax reforms

 

 

US Treasuries. UST yield curve flattened marginally during mid-week, with highlight on FOMC minutes release. The minutes revealed that some Fed members voiced their concerns over inflation, as it may stay below the 2% objective longer than what they expected, raising the probability of a rate hike by 21-March to 81% from 75% compared to last week. Aside, the policymakers believed that the tax reforms will boost the economy in coming years but were unsure on the real impact.

Malaysia. MYR govvies remained thinly traded, with activities led by off-the-runs. On the flipside, the 5y GII continued to attract flows and closed marginally lower by 1bp to 3.79%. As for the 20y MGS with a public tender size of RM2b, WI was quoted at 4.60/55%, higher than 4.60/50% a day prior. Technically, we are seeing it to be priced at the range of 4.55-4.60%, given a rather anchored 4.58% for most of December. IRS rates shifted higher by 1-2bps, driven by net paying interest on the back of rise in UST yields. Overall, the positive sentiment due to the MYR strength was eased by the weakened overnight UST.

Thailand. Thai bonds consolidated in tight range and appeared directionless at the first day of trading in 2018. Even though Thailand's headline CPI recorded at slower pace of 0.66% yoy in 2017 than previous year data at 0.78% yoy due to low fresh food price, demand for bonds was tepid compared with last week's purchases for window dressing.  Soft reading of CPI in Dec together with BoT's comment on the structural factor of low inflation strengthened the expectation of a steady 1.50% policy rate. After inflation data, Baht continued to rise on Mon at USDTHB spot below 32.40 attracted foreign demand for short-ends with total net buy position at Bt3.06b on Wed.

Indonesia. First bond auction of the year saw massive demand, which received IDR86.2t incoming bids (highest all-time, +52% from August), while issuance target was only IDR17t. MoF maxed the issuance to IDR25.5t, yet it was not enough to satisfy buyers, where many chased the auctioned bonds in the secondary market after auction, especially 5y FR63 and 10y FR64 due to a btc ratio which reached 5.37x and 3.34x, respectively. Bonds were biddish until market closed. Market volume doubled to IDR31.2t and was dominated by bonds maturing in over 10 years (52% of volume). With this auction, 25.5t IDR was raised for the government, 50% above the original target.

Asian Dollar Credits, buoyant bids. Asian dollar credits were largely stable with investors showing mild net buying interest during mid-week. Swire Properties' 10y Green Bond was guided at 110-115bps above UST. Meanwhile Commonwealth Bank of Australia's 30y Subordinated T2 bond was guided at T+175bps. Bloomberg news also reported that Citic looking to issue USD Senior Unsecured bonds. CBA and Swire Properties were reported to have sold this around 20bps below indicated price targets.

Best Regards,
CIMB Treasury & Markets Research-Fixed Income
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