FW: CIMB Fixed Income Daily - 25 May 2018 - ID bonds show strength as new BI chief sworn in

 

 

CIMB Fixed Income Daily - 25 May 2018 - ID bonds show strength as new BI chief sworn in

 

US Treasuries moved firm pretty early on Thursday when there was some safe haven demand as Trump called off planned meeting with North Korean officials. Trump categorized recent comments from the North Koreans as aggressive. Sentiment was further aided by strong demand at auction of 7y securities. The auction worth $30b saw bid-to-cover ratio of 2.62x which is slightly higher than average bid-cover of 2.51x at 12 prior 7T auctions. High yield was 2.930% whilst demand from indirect bidders which include foreign central banks was firm as they bought 65.5% of the amount sold (versus 64.8% 12 prior 7T auctions).

 

In Malaysia, trading volume was relatively lukewarm on Thursday. Instead, we noted large interest were slanted along the Treasury bills segment which came alongside auction of 91d bills MTB 05/2018 worth RM1.0b. Nevertheless, there were some concerns along the MGS+GII segment after news reports suggest MOF was investigating whether it needs to step in to cover 1MDB debt payments/servicing in the short- to medium-term period. Aside, MGS with 10y maturity namely MGS Nov’27 was firm at 4.21% (-1bp) but the recently reopened MGS Jun’28 rose 2bps to 4.23%. This could suggest foreign interest along the 10y maturities was mixed on the day.

 

Weak auction demand for the 3y BOT213A sparked weakness in short-term Thai govvies while the other longer-term bonds were little changed. The auction of BOT213A received 0.9 bid-to-cover ratio and higher auctioned range of 1.898%-2.00% as local players did not actively participate this bond sale. Post-auction, local players continued selling front-ends with negative spillover  beginning at LB196A to LB233A. Consequently, front-end within 1-5y segment edged higher by 2-6bps. As the front-end yield traded above the Thai policy rate, we believe it is a justified level and unlikely to retrace below 1.50%.

 

IndoGBs received support Thursday as Bank Indonesia's newly appointed governor Perry Warjiyo was sworn in. Bonds as well FX markets bounced back. IDR strengthened to close at 14145. We think demand came frm from local and foreign banks as well as local real monies. Amongst others, FR64 was taken at highest price (at 7.52% yields). On average IndoGB fell by -6bps on the day. Bloomberg reported that the new governor has pledged to use monetary policy to limit selloff in Indonesia’s bonds and currency. These tools will include exchange rate measures and market intervention.

 

CIMB Treasury & Markets Research-Fixed Income
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