Snapshot Summary…

Global FX: DXY Started the Week on Firm Footing as the Hawkish Sentiment by the US Fed Lingers

Global Rates: US Bond Market Was Closed. Gilts and Bunds Both Saw Higher Yields.

MYR Bonds: Local Bond Market Started the Week on Quiet Tone

USD/MYR: Ringgit Weakened to 4.631, in Line With Most Regional Currencies

Macro News

Euro Area: Two ECB policymakers believe that the ECB should continue raising interest rates to control inflation, which they think might be higher than anticipated. They argue that it's better to take more action now to prevent long-term inflation problems and avoid unnecessary difficulties for consumers in the Euro Area. However, the ECB's chief economist emphasizes the importance of being guided by data and suggests that it may not be necessary to raise rates immediately. He mentions that the ECB is likely to raise rates in the near future but decisions beyond that will be based on incoming data.

Malaysia: Focus today will be on the publication on external trade data for May 2023, due to slowing global economic activity. Consensus now is expecting both imports and imports to disappoint, where growth to continue to be in the negative territory.

Fixed Income

US Treasuries: The US bond market was closed due to the Juneteenth holiday. The UST 2Y was last done at 4.71% while 10Y was at 3.76%.

Other Major Bonds: The market already anticipating a BOE rate hike this week sent UK yields higher still on Monday. The 10Y UK bond ended up 8 bps to 4.49% and remained near at its highest since last October. The 2Y closed at 5.08% and is at highest since 2008. German bund yields remain just off this year’s high as comments from ECB policymakers on Monday continue to suggest more rate hikes. Board member Isabel Schnabel said ECB should err on side of too many hikes than not, in combatting inflation.

MYR Government Bonds: Yields rose as markets digested the increasingly uncertain Fed rate path while the US was closed for the Juneteenth. The local bond market started the week in a quiet tone as players awaited the announcement with regards to the capital market, which as it turned out was largely a non-event for the bond space. Long ends softened following the announcement of 20Y reopening auction of the MGS 10/42 with an auction size of RM3.0 billion with RM2.5 billion private placement. WI was bid far at 4.21%.

MYR Corporate Bonds: Ringgit corporate bond market remained relatively active on Monday with total volume traded at RM244 million. Gainers outpaced losers with investors seen keen to add papers across the AA curves. Notable trades include financial names such as Bank Islam 10/30 (A1) at 4.33% on RM30 million volume and RHB Islamic 05/29 (AA2) at 3.96% (RM30 million).

Forex

DXY Index: The dollar index ticked higher by 0.3% to 102.52 as investors continued to digest Fed’s hawkish pause decision last week. The US market was closed overnight for Juneteenth holiday, a federal holiday commemorating the liberation of enslaved African American.

EUR: The Euro dipped 0.1% to 1.092 but remained close to its one-month peak. The ECB is expected to remain steadfast in its inflation fighting journey as both ECB policymakers Isabel Schnabel and Peter Kazimir argued for further interest rate hike as inflation could surprise to the upside.

GBP: The British pound fell 0.2% and changed hands at 1.279. The currency continued to be supported by the anticipation that BoE rate rises will outpace other major economies amidst still stubborn inflation. Investors also eyeing on UK’s inflation data on Wednesday ahead of central bank meeting (cons.: 8.4%).

JPY: The Japanese yen fell 0.1% to 141.98. A few BoJ officials’ speeches and manufacturers sentiment Reuters Tankan index will be under the spotlight this week.

CNY: The Chinese yuan also weakened by 0.5% to 7.163. With more stimuluses are expected to be roll out to prop up the Chinese economy and at the same time, the US Fed to tighten its policies, such policy gap could put more weigh on yuan. Although, the positive outcome of meeting between US Secretary State Anthony Blinken and China’s President Xi Jinping may cap some losses this week.

AUD: The Aussie dollar fell for the second back-to-back session by 0.3% to 0.685. The latest RBA meeting minutes will be under scrutiny as investors are attempting to gauge its policy path as recent inflation and employment data surprised towards the upside, leaving little breathing room for the RBA.

KRW: The Korean won depreciated 0.7% to 1,282. In its semi-annual report, the BoK warned that the core inflation, which excludes oil and agriculture prices, in the country could prove stickier than previously expected amidst tight labour market and local demand. The upside pressure on core prices is “somewhat big” and the deceleration pace has been “very slow” so far.

MYR: Malaysian ringgit weakened 0.3% to its intraday high of 4.631, and erased some gains made last Friday. Malaysia PM announced measures to shore up domestic capital market including a cut on the stamp duty rate for trading shares from 0.15% to 0.10%.

Other Markets

Gold: Gold Closed Lower by 0.4% to USD1,950/oz as DXY Inched Higher.

Crude Oil: Concerns on China’s economy and prospect of higher US interest rates pushed oil prices lower. Brent fell 0.7% to USD76 per barrel. WTI was unchanged at USD72 per barrel as the US market was closed.

FBM KLCI: The FBM KLCI was down 0.1% to 1,387. Detailed transactions showed that foreign investors and local retailers were the net sellers with RM19.9 million and RM11.9 million flow, respectively, while being offset by the net buying flow from local institutions with RM31.8 million.

US Equities: US stock markets were closed due to Juneteenth holiday. The Dow Jones was last spotted at 34,299, S&P500 at 4,410, and Nasdaq at 13,690.

Source: AmInvest Research - 20 Jun 2023