Snapshot Summary…

Global FX: Dollar Starts the Week Stronger, Buoyed by Hawkish Fed Official Comment

Global Rates: UST Traded in a Narrow Range While Yields on Bunds Ticked Higher

MYR Bonds: Both MGS and PDS Markets Closed Mixed Following Softer US NFP Data Last Friday

USD/MYR: MYR Weakened as Investors Remained Cautious Ahead of US Inflation Data

Macro News

United Kingdom: The Halifax house price index in the UK fell by 2.4% y/y in July 2023 (June 2023: -2.6% y/y), marking the third consecutive month of decline. House prices are expected to continue falling into the next year due to affordability concerns caused by inflation and high interest rates. The Southeast region faces the most downward pressure on house prices. However, an uptick in unemployment is not expected to sharply deteriorate housing market conditions.

Japan: Japan's index of coincident economic indicators increased to 115.2 in June 2023 (May 2023: 113.3), the highest since August 2022, indicating an accelerated economic recovery driven by a rebound in tourism activity and easing supply chain disruptions. The central bank continues its monetary easing measures to support growth.

Fixed Income

Global bonds: The US Treasuries market was supported, levels ending sideways in a narrow range. The 10Y UST was up 2 bps to close at 4.08%. The 8 bps 10Y spread above 4.00% suggests sustained nervousness over the Fed outlook despite the slower NFP release. There were a couple of FOMC voters who made comments. Governor Michelle Bowman said additional rate hikes will likely be needed, while New York Fed President John Williams said over the weekend that rates could come down in 2024 as inflation decelerates. Meanwhile, 10Y Bund yields ticked higher. Germany's June industrial production fell 1.8% y/y (May: 0.1%). Japan's bonds strengthened on Monday, to follow last Friday's UST yield decline. BOJ meeting minutes offered little fresh clues to prior week's YCC policy shift. The 10Y JGB fell 2 bps to 0.62%.

MYR Government Bonds: The MGS market was mostly supported though yields were in tight range. The 10Y MGS shed 1 bps to close at 3.86% on just over MYR100 million volume. Yesterday's 30Y GII auction worth RM3.0 billion (plus RM2.0 billion PP) saw RM7.7 billion bids for a BTC of 2.57x. Average yield was at 4.36% against WI 4.38/33%.

MYR Corporate Bonds: Corporate bonds closed mixed on Monday. Total volume fell to RM307 million which was relatively heavy but down from RM597 million traded last Friday. Trades were led by AAA rated MAHB 11/27 at 3.97%, up 2 bps, on RM40 million volume, and AA1 rated YTL Power Int 03/30 on RM40 million volume done at 4.40% or -1 bp from prior traded level. Amongst the GG's, DanaInfra 11/34 was dealt at 4.00%, down 3 bps.

Forex

US: The USD ended Monday slightly higher by 0.03% to 102.05, supported by hawkish remarks by Fed official Michelle Bowman (voting) which pushed back against growing hopes that the US Federal Reserve is nearly done with its tightening cycle. The early gains were erased by the negative sentiment carried over from last Friday when US July payrolls grew less than expected. Europe: Concerns on Germany’s economic prospect resurfaced, prompted by the sharper-than-expected industrial production (-1.5% m/m vs. consensus -0.5% m/m) which sent the EUR to 1.100 level or 0.04% lower. Conversely, the GBP rose 0.3% to end the day at 1.278 on the expectations that the Bank of England (BoE) will continue to raise its interest rate further to fight the stubbornly high inflation.

Asia-Pacific: Traders continued to assess the effects Bank of Japan (BoJ)’s YCC policy adjustment as USD/JPY pair grinded higher approaching 142.5 level. According to the July’s meeting minute, the central bank’s board members remained committed in keeping the ultra-accommodative policy but also stated that the signs for phasing out the stimulus is getting clearer if the inflation trajectory remained as it is. The CNY eased 0.3% to trade around 7.193 as the currency remained pressured by the recent soft economic data and the expectations widening policy stance between the People’s Bank of China (PBoC) and other major central banks. But losses were trimmed as state-owned banks were seen selling dollars to support the yuan.

MYR: The ringgit opened at 4.546 (Friday close at 4.554) before it weakened and closed Monday at 4.560. MYR was lacking in support despite the soft US NFP data last Friday as investors remained cautious ahead of US inflation data due Thursday.

Other Markets

Gold: Gold price trended down and fell 0.3% to USD1,937/oz by the end of the session, weighed by the higher dollar and uptick in UST yields.

Crude Oil: Oil prices eased after reaching four months high on Friday as market players cashing in some profits. Nonetheless, supply concerns in the oil market remained following Saudi Arabia and Russia’s announced cut plans. Brent fell 1.0% to USD85 per barrel while WTI fell 1.1% to USD81 per barrel.

FBM KLCI: Local bourse’s marginally rose 0.04% to 1,446. Detailed transactions showed that local retailers were the net sellers with RM23.8 million flow, offset by the local institutions and foreign investor’s net buying flow of RM23.0 million and RM0.8 million, respectively.

US Equities: US Equities Rose as the S&P 500 Climbed 0.9%, Dow Gained 1.2% and Nasdaq by 0.6%.

Source: AmInvest Research - 8 Aug 2023