FW: CIMB Fixed Income Daily - 23 Jan 2018 - IDR govvies corrected, tracking UST losses

 

 

UST curve bull flattened with longer end yields settled marginally lower on Monday. Government shutdown will soon be ended after Senate passed the short-term funding bill through 8 Feb during vote early this week. The bill is now sent to Trump for his signature. Upcoming highlight will be on ECB meeting slated for 25 Jan. Aside, important data releases on tap this week include new home sales, 4Q17 GDP and durable goods orders.

Stronger MYR failed to lift govvies. Trading activities were muted in MYR govvies space, excluding non-benchmark MGS Jun'31 which traded 5bps higher to 4.44%. Sentiment was not lifted although MYR extended gains against the greenback. Overall, sovereign bonds were dealt on sideways within 1-2bps range on Monday. We see flows to stay muted heading towards MPC meeting.

Mild profit taking in Thai govvies. Profit taking flows lifted Thai govvies yields mildly at less than 1bp since BOT conducted open market operations (OMOs) purchasing Thai government bond maturing from 3 to 14y tenures. LB21DA was actively traded and considered block trades.  According to BoT report, selling interest from local funds and banks was overwhelmed at Bt40.24b submitted amount but BoT only absorbed only Bt13.53b amount. This signals sell-off dynamic may maintain especially after UST yield glided with 10y yield at 2.66% milestone. Meantime, short-term BoT bond maturing in 1 to 2y look resilient to sell-off risk with only Bt1.6b submitted and accepted amount while the BoT allows total size at Bt10b. Foreign investors were net seller of Thai bond at Bt2.66b and Thai stock at Bt459m after Thai exports data in Dec surprised at the downside and concern about delay in general election increased. In sum, we aware downside risk in Thai government bond due to external environment of rising UST yield and noticeable selling interest from local and offshore player.

Indonesia's govvies supported by foreign inflows. IndoGB posted losses on Monday as market adjusting to higher UST yields, despite USD/IDR was flat during opening hour. Bond yields went up 7-9bps on average, while supports were mainly provided by local banks, alongside some dip buying from local end investors.  Market was stuck at current level until closed. MoF will be holding sharia bond auction tomorrow with IDR8t target. As a proxy of local demand, the incoming bids can serve as a gauge of whether local appetite is still strong. Market volume decreased to IDR14.9t whilst trade concentration shifted toward the end of the curve.

Asian Dollar Credits were traded on weaker tone amid rise in UST yields since late last week. However, selling pressure was mild despite political concerns sparked after the US Senate failed to pass the funding bill to keep the government operating. Aside, Fosun's 5NC3 bond was guided at 5.95%, tighter than 6.125% indicated earlier. Highlight this week remains on primary pipelines with several names reported by Bloomberg, including Beijing Capital, FWD and Union Medical Healthcare.

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CIMB Treasury & Markets Research-Fixed Income
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