FW: CIMB Fixed Income Daily - 23 May 2018 - Regional bonds hold steady amid sideways US Treasuries

 

 

CIMB Fixed Income Daily - 23 May 2018 - Regional bonds hold steady amid sideways US Treasuries

 

US Treasuries closed mildly firmer with trade worries further declining after China said it will cut tariffs on passenger vehicles and auto parts. However, further gains were not forthcoming, with some geopolitical risks after Trump said a scheduled summit in June with North Korea’s leader Kim could be cancelled. Trump said the US is still seeking ‘full denuclearization’ (as reported by WSJ). This came after some North Korean officials recently signaled nuclear disarmament would not be discussed.

 

Aside, the Treasury Department sold $33b of 2y securities. Demand was pretty average at 2.88x against 2.85x at 12 prior 2T auctions. High yield was 2.59%. Meanwhile, indirect bidder participation was pretty weak at 39.3% of the amount sold, or the lowest since December 2016.

 

Malaysia’s government bonds were dealt firm on relatively active volume on Tuesday. Sentiment was aided by overnight relatively firm UST movement with the 10T hovering below the 3.10% level. Heavily traded include GII Aug’20 which fell 2bps to 3.72% on RM250m volume. Markets remained glued to the news to gauge the government’s policy going forward, but players more or less are placing a more upbeat outlook on fiscal plan for now (after last week’s announcement to remove GST). Meanwhile, the current 10y benchmark MGS Nov’27 was firm as it shed 1bp to 4.20% on RM181m volume. We noted quotes for MGS Jun’28 at 4.20/15% against levels near 4.22% a day prior. Auction for the 10y MGS Jun’28 worth RM3.5b closes today and we expect firm demand from domestic players especially.

 

Momentum of rising Thai bond yields slowed Tuesday and most papers consolidated in a tight but higher range at less than 1bp on Tuesday, though we also noted yields increased by 1-2bps along some particular papers along of 2-3y, 6y-7y, and 22y-28y tenors. We believe the auction of LB26DA faces low long-tail risk amid the waning upward momentum of rising yields.

 

In Jakarta, yesterday’s auctions provided steady incoming bids of IDR31.5t against IDR10t target. We saw almost half (45%) of the bids went towards FR64, and that most of the bids were from local players whilst we still noted some offshore outflow. The government upsized the issuance to IDR15t. As bid cover ratio for FR75 rose to 5.75x and its yield fell by 3bps.

 

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
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