FW: CIMB Fixed Income Daily - 08 May 2018 - Regional bonds consolidates; IndoGBs down after 1Q GDP release

 

 

 

CIMB Fixed Income Daily - 08 May 2018 - Regional bonds consolidates; IndoGBs down after 1Q GDP release

Malaysia’s ringgit government bonds moved sideways and mostly in range with most seeing thin volume except for selected papers ahead of general elections this week. The larger flows were heard along MGS Apr’33 which was unchanged at 4.61% (likely support from domestic players), and short dated MGS Sep’18 at 3.32% or up 1bp. Meantime, the new 15y MGS (MGS Nov’33) was heard little changed at 4.64%. At that level, the 10x15 bond spread is 52bps. In contrast, the 10x15 spread had averaged about 46bps in the past year. Consequently, we expect further though moderate demand for new 15y MGS in short term period, probably seeing support till 10x15 spread around 46-48bbps.

Thai bond yields adjusted higher 1-2bps across all tenors on Monday amid net selling activity among local and offshore players. Rising USD/THB, firm US jobs data in April, together with incoming LB326A auction on Wednesday looked negative for Thai fixed income securities.

IndoGBs were traded weaker on Monday on the back of disappointing 1Q18 GDP at +5.06%, or below +5.19% expectation and 4Q17’s +5.19%. We suspect net selling activity were mainly by offshore and foreign banks. We noted there were bids on FR64 at 7.04-10%. Also we noted short tenors traded in size at higher yield levels; including FR69 1y bond at 6.48%. IndoGBs closed up to 23bps higher for 5-20y tenors. Volume was steady at IDR20.2t with flows concentrated at the tail of the curve.

Asia’s dollar bonds moved firm on Monday, aided by risk appetite after last week’s steady NFP release whilst US Treasuries remained firmly below the 3.00% mark whilst crude oil had rallied. However, additional buying was limited as the weekend saw the US-China trade talks concluding without any major progress made. This renews concerns for escalating tariff tit-for-tats as the US Trade department has until end-May to decide on whether to proceed with the tariffs on China. Along the primary segment, Bloomberg reported Thailand’s Eximbank was on roadshow for possible USD bond deal.

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(See attached file: Fixed Income Daily 080518.pdf)

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