FW: CIMB Fixed Income Daily - 07 Jun 2018 - BNM Governor Surprises with Departure; MGS Largely Unchanged

 

 

CIMB Fixed Income Daily - 07 Jun 2018 - BNM Governor Surprises with Departure; MGS Largely Unchanged

US Treasuries sell down following the momentum led by the ECB. Statements made by the ECB Chief Economist, Peter Praet confirmed that the ECB was planning for the tapering of its current monthly purchases via the Asset Purchase Program (APP). The current plans for the APP only span up to September this year.  This led to a sell down in global govvie bonds. The 2y MGS spiked up a further +2bps to 2.52% while the 10y USTs rose +4bps to 2.97%. The 30y UST rose to 3.13%. Over in economics news, the US Trade balance fell to $46.2bn in April, following a pick up in exports. This larger than expected increase may spur additional expectations in the coming months, as the tariffs imposed by the US begin to take effect. The jobless claims data is expected later today.

 

LB366A BTC of 1.48x. Thai bonds continued to gain with firm bidding from offshore and onshore players. The auction of Bt13b LB366A attracted decent demand at 1.48 bid-to-cover and ranged between 3.18%-3.22% with an average yield at 3.198%; better than pre-auction bidding levels of about 3.22%-3.23% on Wednesday’s open. Post-auction, LB366A gained further and last bidding was seen at 3.195%. This successful bond sell aided Thai govvvies sentiment and purchasing interest was witnessed along the curve. Front-end yield declined as supply of the central bank bill (CB) was running out and the baht gained with USDTHB testing 31.84 low.  

 

IndoGB was quiet in the Wednesday morning with muted trading occurring. FR64 was quoting wider at 7.15%/7.07%. Bonds started to quote lower prices in the afternoon despite the strengthening seen in the IDR. Some position trimming seems to have continued ahead of the upcoming long Hari Raya holiday. Also being baked into current positions is the fact that the FOMC is scheduled to meet during this holiday period. All in all we are still seeing demand in the market as the MoF just issued Private Placement on 31 May. Overall, IndoGB yields were up by around +6bps and FR64 closed at 7.20%/7.12%. Market volume decreased to IDR16.4t whilst trade concentration was evenly distributed along the curve.

 

BNM Governor surprises with departure. Investors saw the surprised acceptance of resignation of the BNM Governor Tan Sri Muhammad Ibrahim by the Malaysian government in the middle of his tenure. His successor will be on the forefront of many investors’ minds. This occurs ahead of the upcoming auction of the new 20y benchmark, the MGS 06/38.  The second auction of the 20y benchmark for the year will have a planned issue size of RM 3.5b. Also to be watched will be the foreign holdings of Malaysian govvies, and the reserve levels of Malaysia scheduled to be released later today. Despite the deluge in information, the MGS curve was largely unmoved, the 3y MGS rallied -0.6bps while the 10y MGS closed +1.3bps weaker at 4.20%. Trading in Malaysian govvies saw a pick-up, especially in the short end of the curve, but remained below the average for the year. The USDMYR closed at 3.9732 (+0.03%).

 

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