FW: CIMB Fixed Income Weekly - 30 Jan 2018 - Better view on longer tenor MY bonds

 

 

US Treasuries

• We'll look towards FOMC statement this week, as well as incoming data including core PCE (mom expected to edge up to +0.2% in Dec from 0.1% in Nov), ISM manufacturing data, and the January NFP (consensus +180k against 148k in December). We maintain expectations of a flat yield curve in the immediate term horizon, as we expect FOMC to maintain signals for more hike(s) this year whilst macro data shows mixed to stronger numbers. We expect 2x10 spread 50-60bps this week, with a bullish slant towards the longer tenor.

Malaysia

• Bank Negara Malaysia raised the OPR by 25bps to 3.25% at the first policy rate meeting of the year last week. This was Malaysia's first rate hike since July 2014. The statement accompanying the decision remains hawkish and policymakers pointed towards brighter prospects for global growth and domestic demand.
• In the short to medium term, we are cautious of a bear-flattening bias if monetary tightening bias strengthens, though this could be tempered if MYR's positive momentum continues. We think with MYR very strong below 3.8800, flows for short tenor MGS should pick up in short term period. However, we are cautious on this trend especially if or when MYR consolidates.
• Dependent on the 10y MGS (MGS Nov'27) maintaining below 4.00%, we expect the 15y to hover near 4.35-40% in the short to medium term period. Lastly, we expect swap spread to remain wide in the short term period, eyeing the 5x5 swap spread near 30bps.

Indonesia

• Cautious on IDR bonds this week. We will closely monitor UST movement to guide demand in the onshore market, splitting the difference between IDR and UST yields gap and USD/IDR movement. USD/IDR is back above 13350 and does not look a solid booster for bond market sentiment. Highly likely we're looking at 10y govvies above the 6.30% level this week.

Thailand

• Profit taking pressure amid the surging UST yields and Thai trade deficit for December 2017 were mitigated by open market operation demand and firm LB26DA auction.
• With UST yields sustained higher, THBIRS rose about 2bps with 5y and 10y swap rates at 1.97% and 2.395%. Thai government bond yields are under upward pressure starting at 4y tenors (upward pressure 2-3bps). While the absence of LB supply this week will somewhat mitigate risk of sell-off, FOMC language and January US employment report will be closely watched.

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

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