Snapshot Summary…

Global FX: Dollar Index Took the Back Seat While EUR and GBP Rose

Global Rates: Global bonds were weaker with Gilt and Bund 10Y yield rising 7 and 5 bps, respectively

MYR Bonds: The MGS market saw sideways trading yesterday as players seek fresh leads

USD/MYR: Ringgit appreciated following statement by FMC

Macro News

United States: Home prices in the US declined for a second consecutive month, contracting 1.7% y/y in April 2023, the largest drop since April 2012. Seattle and San Francisco experienced the biggest decreases, while Miami, Chicago, Atlanta, and Charlotte reported gains.

Malaysia: In May 2023, producer prices continued to decline for the fourth consecutive month. Prices dropped by 4.6% y/y, which was the largest decrease since May 2020. The agriculture, forestry & fishing sector and the mining & quarrying sector saw significant price declines, while costs for water supply and the manufacturing sector also decreased. However, there was a slight increase in producer inflation in the electricity & gas supply sector. On a monthly basis, producer prices fell by 0.4% m/m in May 2023, following a small rise of 0.2% m/m in April 2023.

Fixed Income

US Treasuries: Treasuries closed weaker after reversing early day gains. Losses were on the back of better than expected economic data including Consumer Confidence for June at 109.7 and May New Home Sales at 763,000. USD43 billion 5Y auction received 2.52x BTC versus 2.45x average at 12 prior auctions of the same tenor. The 10Y UST closed at 3.76% up by 4 bps.

Other Major Bonds: German bunds closed weaker as ECB President Christine Lagarde maintained a hawkish tone while at the two-day Sintra conference. There are growing concerns that ECB will follow a hike in July with another in September. UK government bonds posted losses on Tuesday, after last week's gains post a surprise BOE large hike. Bond markets await Fed's Jerome Powell address at the Sintra conference.

MYR Government Bonds: The MGS market saw sideways trading yesterday as players seek fresh leads ahead of the reopening of MGII 07/28 tender scheduled for today. The WI level was in a tight range at 3.64/3.65% level though no trades were seen. The 10Y MGS closed lower by 1 bps to 3.82%.

MYR Corporate Bonds: In the PDS space, heavy interest was seen with volume traded amounting to RM531 million while most trades ended with yields declining. Notable trades include short-dated AAA Aman Sukuk 04/24 at 3.66% on RM60 million flows, and AAA Danum Cap 02/34 at 4.34% on RM40 million volume. There was continued interest in PLUS (AAA) where the 01/37 paper was dealt at 4.46% on RM30 million traded.

Forex

DXY Index: The DXY eased 0.2% to 102.49 after economic data released showing still a healthy US economy. Better-than-expected reading on orders for non-defence capital goods excluding aircraft (0.7% vs. cons. 0%) alongside sales of new singlefamily houses (0.763 million vs. cons. 0.675 million) amidst high living cost and tight monetary policy, has fuelled risk-on mode and eased the recession worries.

EUR: The euro rose 0.5% to 1.096 alongside weaker dollar and following ECB’s President Christine Lagarde’s hawkish remarks. She stated that the central bank will not be able to pinpoint the end of its policy tightening cycle anytime soon in order to fight inflation. At the same time, she also reiterated that ECB would continue raising interest rates in July’s meeting.

GBP: The pound was down 0.3% to 1.275. As inflation in the UK remained sticky, traders have raised the expectation of BoE’s rate terminal level at 6.50% with 20% chance of probability.

JPY: The Japanese yen weakened 0.4% to 144.07. Last night, amidst yen’s slide, Japan’s chief currency official Masato Kanda warned that authorities will respond appropriately if there are any “excessive moves” in the foreign exchange market. This can be a sign that policymakers have become uncomfortable with the recent volatility in the FX market.

CNY: The Chinese yuan appreciated 0.2% to 7.224 after few state banks sold dollar in onshore market to prop up the yuan despite officials pledging for more stimulus to strengthen the economic recovery.

AUD: The Aussie dollar rose 0.2% to 0.669, in tandem with stronger yuan and hopes for further stimulus in China. Nonetheless, market players will also be looking at Australia’s monthly CPI data today with an expected 6.1% y/y reading compared to 6.8% y/y in the previous month.

KRW: The Korean won appreciated slightly by 0.4% to 1,300. Data showed that consumer confidence in South Korea improved to 100.7 during June 2023 (cons.: 96.4), the highest level since May 2022 as inflation has eased from the multi-year high (last spotted at 3.3% y/y vs. peak of 6.3%).

MYR: Malaysian ringgit strengthened 0.2% to 4.666 as the Malaysia’s Financial Market Committee (FMC) noted that the recent ringgit weaknesses (near seven months low) are not reflective of Malaysia’s economic fundamentals. It also indicated that BNM will intervene in the FX market to curb “excessive” movement as monetary policy tightening by major central banks has put pressure on other currencies including the ringgit.

Other Markets

Gold: Gold price fell as strong economic data points toward more policy tightening. It dipped 0.5% to USD1,914/oz.

Crude Oil: Market players took the hint of robust economic data as higher interest rate peak, which pushed down oil prices. Brent dipped 2.6% to USD72 per barrel while WTI dropped 2.4% to USD67 per barrel.

FBM KLCI: The FBM KLCI was down by 0.2% to 1,387. Detailed transactions showed that foreign investors were the net sellers with RM98.0 million flow, while being offset by the net buying flow from local institutions and retailers with RM92.6 million and RM5.4 million flow, respectively.

US Equities: Wall Street closed higher with Dow Jones climbing 0.6% to 33,927, S&P500 gaining 1.1% to 4,378, and Nasdaq rising 1.6% to 13,556.

Source: AmInvest Research - 28 Jun 2023