28 October 2014
Fixed Income Research
Mostly sidelined for FOMC on Wednesday

Govvie market volume tapered RM1,330m traded excluding
RM3.64bn that was done on MGS 7/16 which yields rose
marginally by 0.6bp. The 3y/10y was flatter at 30.7bps or 1.0bps day on day.

Most non-benchmark
maturities.

The spread of the GII 5/24 vs. MGS 7/24 widened marginally
to 33.9bps, more due to the buying interest on the MGS 7/24
which dipped by 2.9bps to 3.78%..

Market was generally listless as most players stayed
sidelined ahead of the FOMC statement on Wednesday.

The 10y UST closed firmer at 2.26% on pending home sales
which was 0.3% mom, below expectation of 0.8%. This
suggests the housing market is yet on good footing.
Additionally, the ECB which reported €1.7bn of covered
bonds was purchased last week also lent support to UST.
trades
were
focused
on
short

SPX was marginally softer by 0.15% to 1962pts on the “risk
on concerns of weaker oil prices causing deflation.

The MYR closed almost unchanged at RM3.2765. We
maintain the view of structurally firmer USD on the back of
better US data going forward. Nonetheless, we note that the
commercial position is ultra-long the USD at the present
moment.

Risk assets market is back in favor with VIX lower to 16.04
down 0.43%.

PDS trades amounted to RM434m done with interest on
PLUS 1/38 which saw its yields dipped by 0.5bp to 4.855%
on RM70m done while Sime 11/16 saw buying interest
where yields dropped by 4.5bp to 3.811% on RM55m done.

The biggest event to watch out for this week is the FOMC
announcement on Wednesday. Here we expect the Feds to
still maintain “considerable time” statement of keeping rates
low.

STRATEGY: With VIX trending lower gradually, i.e. risk
appetite increasing optimism has improved with a “risk-on”
tone. Overweight risk-assets but rising UST could impede
demand for MGS. Making this call very challenging is the
emerging theme of low energy prices which may keep
inflation low for some time. Consequently yields will also stay
low if the inflation them persist.
MGS/
GII
Maturity
Changes
From
Prev Day
bps
MGS Benchmarks
MGS
3/17
MGS
10/19
MGS
9/21
MGS
7/24
GII Benchmarks
GII
11/17
GII
4/19
GII
3/21
GII
5/24
Non-benchmarks
MGS
8/15
MGS
10/15
MGS
7/16
MGS
2/17
MGS
9/17
MGS
10/17
MGS
2/18
MGS
3/18
MGS
9/18
MGS
11/19
MGS
7/20
MGS
7/21
MGS
4/26
GII
12/28
MGS
4/30
MGS
4/32
MGS
4/33
MGS
9/43
Last
Traded
Yield
%
Volume
RM m
-0.9
0
+1.4
-2.9
3.472
3.628
3.775
3.779
49.7
15.9
5.5
27.2
0.0
+1.8
0.0
+0.5
3.636
3.794
3.976
4.118
Not Traded
80.0
Not Traded
380.0
-14.4
-8.5
+0.6
+1.4
+3.6
+1.8
+0.3
-0.3
+2.7
+1.6
-0.9
-2.6
+0.5
+0.7
+0.2
-5.5
+0.6
-1.2
3.221
3.324
3.455
3.488
3.532
3.533
3.586
3.592
3.593
3.681
3.694
3.793
4.024
4.393
4.158
4.252
4.239
4.638
330.6
262.3
3647.7
10.0
37.9
10.0
15.0
10.0
2.4
13.9
25.0
2.3
1.1
20.0
12.7
0.1
2.5
16.2
Source: BNM IRS fixing at 11am
Marc Foo
(603) 2146 7727
[email protected]
Affin Hwang Investment Bank Bhd (14389-U)
(Formerly known as HwangDBS Investment Bank Bhd)
Page 1 of 3
28 October 2014
US & Regional Economies
Pending home sales in US increase less than
forecast
The number of contracts to buy existing homes rose
less than forecast in September, signaling demand will
probably plateau heading into the end of 2014. The
pending home sales index increased 0.3% in
September after dropping 1% in August, the National
Association of Realtors said. The median projection in
a Bloomberg survey called for a 1% gain.
US services activity remained solid in Q314
The pace of US services activity in the Q314 remained
at an elevated level after cooling a bit during October.
The preliminary Markit Services Purchasing Managers’
Index (PMI) slipped to 57.3 in October from a blistering
58.9 in September. This brought the Composite
(services and manufacturing PMIs) to 57.4, also lower
than the September reading of 59.
ECB says €1.7bn of covered bonds bought last
week
The ECB said it settled €1.704bn (US$2.2bn) of
covered-bond purchases last week as it started its
latest effort to revive the euro-area economy. The
central bank began purchases on Oct. 20, returning to
the market for a third time in six years as part of a
renewed attempt to stave off deflation and pump life
into a moribund recovery. President Mario Draghi plans
to fulfill his pledge of expanding ECB’s balance sheet
by as much as €1trn.
German Ifo business confidence drops for sixth
month
German business confidence dropped for a sixth month
as the specter of a recession haunts Europe’s largest
economy. The Ifo institute’s business climate index
dropped to 103.2 in October from 104.7 in September.
Median forecasts surveyed by Bloomberg predicted a
decline to 104.5.
Schaeuble says EU’s Russia sanctions over Ukraine
will work
European Union sanctions imposed on Russia over the
Ukraine crisis were “unavoidable and they’ll pay off,”
German Finance Minister Wolfgang Schaeuble said.
Schaeuble said the current weakening of Germany’s
economy “has to do with geopolitical risks in the first
place and that’s not surprising when you look at what’s
happening in Ukraine.”
France to make extra budget efforts, Sapin tells EU
Commission
France will work harder to cut its public deficit with a
tougher crackdown on tax fraud and aided by lower
borrowing costs, Finance Minister Michel Sapin told the
European Commission. The euro-area’s second-largest
economy will reduce the deficit by an additional €3.63.7bn (US$4.7bn), the minister said. In the budget law for
2015 submitted initially, France estimated the 2014 deficit
would rise to -4.4% of GDP, the first increase in five
years. For 2015, it saw almost no improvement to -4.3%
of GDP.
Source: Bloomberg, AffinHwang
(Nur’Shazeya; 03-21450541;
[email protected])
Affin Hwang Investment Bank Bhd (14389-U)
(Formerly known as HwangDBS Investment Bank Bhd)
Page 2 of 3
28 October 2014
This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) (formerly known as HwangDBS Investment Bank
Berhad) (“the Company”) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does
not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or
rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing
view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the
Company’s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its
associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss
of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the
Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any
securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or
take proprietary positions that are inconsistent with the recommendations or views in this report.
Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial
status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to
seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment
strategies or transactions discussed in this report.
Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability
for any damages of any kind relating to such data.
The Company’s research, or any portion thereof may not be reprinted, sold or redistributed without the consent of the Company.
The Company, is a participant of the Capital Market Development Fund-Bursa Research Scheme, and will receive compensation for the participation.
This report is printed and published by:
Affin Hwang Investment Bank Berhad (14389-U)
(formerly known as HwangDBS Investment Bank Berhad)
A Participating Organisation of Bursa Malaysia Securities Bhd
Chulan Tower Branch,
3rd Floor, Chulan Tower,
No 3, Jalan Conlay,
50450 Kuala Lumpur.
www.affininvestmentbank.com
Email : [email protected]
Tel : + 603 2143 8668
Fax : + 603 2145 3005
Affin Hwang Investment Bank Bhd (14389-U)
(Formerly known as HwangDBS Investment Bank Bhd)
Page 3 of 3