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FXWire Pro Headline | August 16 2012 4:41 EDT
Quotes from Barclays Capital:
-Recently, most Asian rates have followed the sharp move in 10y USTs from the low of 1.39% on July 24 to 1.82% today. Moreover, MGS (and MYR IRS) have underperformed, especially since the weak 5y benchmark auction earlier this week.
-While the poor auction results (eg, bid/cover of 1.24x) could be coincidental (weak demand for MGS due to private debt security issuance, Ramadan holiday), we do not see much room for a rally in the near term given the very fragile local market sentiment.
-The price action may improve because local and external positioning in MGS appears to be light, but it will be conditioned on stability in global markets, in our view.
-As we look to a series of events over the next couple of weeks -- Jackson Hole, US nonfarm payrolls, the ECB meeting, Germany's constitutional court ruling on the ESM -- we think risk/reward favours taking profit and reassessing the risks once the event calendar is out of the way. In addition, much stronger-than-expected GDP growth in Q2 (and an upward revision to Q1) is not supportive for rates.
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