FW: CIMB Market Musings - 23 May 2018 - 10y MGS auction: Result not impressive

 

 

CIMB Market Musings - 23 May 2018 - 10y MGS auction: Result not impressive

 

Not impressive. We saw RM3.5b reopening auction of MGS Jun’28 garnering slightly disappointing demand with bid-to-cover (btc) ratio of 1.851x. In contrast, the RM3.5b sale of 10y MGS (MGS Nov’27) done in February this year saw 2.066x btc and RM4.0b in sale of GII Oct’28 done in April saw btc of 2.696x.

 

But yields moved down. Average yield at the auction was 4.202% (high-low of 4.215-4.178%). We think demand was aided by MGS Jun’28 now morphing into the new 10y benchmark. We noted that WI levels had moved towards 4.21/18% this morning from around 4.20/15 the day before. Meantime, we noted pre-existing 10y benchmark MGS Nov’27 had moved from around 4.16% a week ago to 4.21% on Monday 21 May and higher to 4.22% yesterday. At 4.21/18% WI levels for MGS Jun’28 suggested to us some flows were moving out of MGS Nov’27 and into MGS Jun’28 as their yields converged – even though MGS Jun’28 is obviously a tad longer in maturity, as well as has longer duration.

 

There was some concern on supply. Supply was not heavy as pre-existing outstanding amount was just at RM5.0b (if we add reopening amount will sum RM8.5b for MGS Jun’28 against RM14.5b for MGS Nov’27). However, there will be more supply later in the year. MGS Jun’28 faces another reopening come September. There’s also two more 10y GII auctions in July and October.

 

We remain upbeat MGS as a whole (see our Thematic Outlook: Malaysia’s New Beginning dated 21 May 2018), and maintain expectation for 10y MGS to move to 4.00% by 3Q2018.

 

CIMB Treasury & Markets Research-Fixed Income
Tel: +603 2261 8557 | Fax: +603 2261 8705
www.cimb.com
Find us on Bloomberg at CIMR <Go>

 

******************************************************************************************************************************************************
Privileged/confidential information may be contained in this message. If this message is received by anyone other than the intended addressee, please return the message to the sender by replying to it and then delete the message from your computer. Unintended recipients are prohibited from taking action on the basis of information in this e-mail. No confidentiality or privilege is waived or lost by CIMB Group including its affiliates (CIMB Group) by any mistransmission of this e-mail. CIMB Group does not accept responsibility or liability for the accuracy or completeness of, or presence of any virus or disabling code in, this e-mail. CIMB Group reserves the right to monitor e-mail communications through its networks (in accordance with applicable laws). Opinions, conclusions, statements and other information in this message that do not relate to the official business of CIMB Group shall be understood as neither given nor endorsed by it.

CIMB Group Sdn Bhd (incorporated in Malaysia, (Company No: 706803-D)). Registered Office: 13th Floor, Menara CIMB, Jalan Stesen Sentral 2, Kuala Lumpur Sentral,, 50470 Kuala Lumpur, Malaysia.

Visit our website at www.cimb.com ******************************************************************************************************************************************************