FW: CIMB Fixed Income Daily - 05 Apr 2018 - Treasuries pare down reaction to China?s threats to trade

 

 

CIMB Fixed Income Daily - 05 Apr 2018 - Treasuries pare down reaction to China’s threats to trade

 

US Treasuries posted early gains (along with German bunds down 1bp) but soon ended with mild losses as equities markets rebounded because players pared down reaction to China’s announcement of tariffs on as much as $50b of imports from the US at rate as high as 25% and which include major US products such as soybeans, automobiles and chemical products. Markets, by late in the day, posited that China’s announcement reflect a tactical move than firm plans to build trade barriers. Ahead of NFP on Friday, the ADP jobs report for March showed +241k against +210k consensus. And consensus for March NFP is +185k against +313k in February. NFP to beat consensus should lift yields in the short term period. Resistance for 10T is way down at 2.63%. On the flipside, short term support for 10T is at 2.83% (next support likely around 2.95% and next 3.05%).

 

MYR government bonds strengthened but mostly along the front and back of the yield curve. Front ends gained as with MYR mildly weakened after China’s announcement to implement more tariffs against US products. However, the 5y MGS edged 2bps higher to 3.55%. Heavily traded was off-the-run MGS Sep’21 which grinded 1bp higher to 3.57% on nearly RM800m volume. Nevertheless, benchmark 3y MGS (MGS Nov’21) was steady at 3.46%.

 

In Thailand, yields at the front- and long-end of the curve edged moderately higher at less than 1bp due to sell-off in source bonds and most of destination bonds as the debt-switching program was coming to end of the allotment date on Wednesday. Foreign investors booked profit in short-term bonds after USD/THB shot above 31.20 on news China will impose 25% reciprocal tariffs on 106 US products.

 

Sentiment in the IndoGB market was positive on Wednesday, with demand seen mostly along the 7y to 20y buckets, including off the run series. There continued to be offshore inflows as well, which helped improve the tone further. By closing time, yields had fell on average -3bps along mid to longer tenors. Volume rose to IDR23.6t and trade concentration stayed at the tail end of the curve.

CIMB Treasury & Markets Research-Fixed Income
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