Snapshot Summary…

Global FX: Dollar Plays Continued to Dominate, Aided by Positive Macro Data

Global Rates: Yields Remained Elevated as Crude Oil Surged Past USD95

MYR Bonds: MGS Fell as USD/MYR Rose Above 4.70

USD/MYR: USD Bids Continued to Pressure the Ringgit Amidst the “higher-for-longer” US Rates Theme

Macro News

United States: The US economy maintained its growth rate of 2.1% in 2Q23 (final estimate) which was the same as the previous estimate. This growth was about the same as the upwardly revised 2.2% growth in 1Q22. The update was influenced by a downward revision in consumer spending, but this was partially balanced by upward revisions in non-residential fixed investment, exports, and inventory investment. Additionally, there were downward revisions in imports.

Euro Area: In September 2023, the consumer confidence indicator in the Euro Area remained at -17.8, marking the lowest level in the past six months. This decline in consumer confidence was mirrored in the EU, where it decreased for the second consecutive month. Survey respondents expressed increased pessimism regarding their household's past and future financial situation, as well as their expectations for the general economic situation in their country. Additionally, consumers indicated a reduced intention to make major purchases.

Fixed Income

Global bonds: On Thursday, US Treasuries posted modest gains after crude oil which broken USD95 per barrel fell slightly ahead of the market close. Likewise, strong crude prices meant German bund yields were sustained near 12-year highs. The 10Y UST closed 3 bps lower at 4.57% after hitting the high of 4.69%. There was also safe-haven demand as there is concern of a partial government shutdown as the House of Representatives prepared to vote on its stopgap funding bill that could be rejected by the Senate. In data releases, as expected the third estimate for 2Q2023 GDP was unchanged from the second estimate at 2.1%. Initial jobless claims for the week ended 23 September increased just 2K to 204K while continuing claims for the week ended 16 September increased by 12K to 1.67 million.

MYR Government Bonds: The Malaysian government bond market was in jittery mode in the morning following a sudden spike in USDMYR level which surpassed 4.7000 as global markets turn led cautious ahead of the possibility of U.S government shutdown if the funding bills is not passed. Later session saw the market stabilising with net buying on long dated bond. The reopening of MGIl 07/28 tender saw WI traded near 3.80%. The MYR5.0 billion tender fetched a decent BTC of 1.954x with tender yield averaging 3.808%.

MYR Corporate Bonds: Corporate bonds closed firm on Wednesday ahead of the midweek public holiday. Volume traded was heavier at MYR1.1 billion. Notable trades include AAA SEB 07/33 which was recently issued in July was in demand at 4.24%, while there were debuts for AA2 Imtiaz II 10/26 and 10/28 at 4.05% and 4.15% respectively.

Forex

US: The USD index marked sixth straight days of bullish run on Wednesday before some pullback last night. The narrative remained in favour of the US dollar as the market continues to see economic data overnight reflecting resiliency in the economy. US GDP for 2Q2023 was affirmed at 2.1% q/q for its final calculation while initial jobless claims were up to 204K last week but fell short from market expectation of 215K.

Europe: Positive sentiment coming out from Eurozone, nudged by slower Germany’s inflation (Sept: 4.5% y/y vs. cons: 4.6% y/y) and better reading on economic sentiment in the region (Sept: 93.3 vs. cons: 92.5), supported EUR. The common currency rose 0.6% to settle at 1.057. In tandem, GBP also climbed 0.6% against the weaker USD.

Asia-Pacific: Traders continued to monitor news flow for any hint of JPY intervention by authorities as the currency is hovering around 150-level (level which prompted the intervention last year). As the dollar was lower, the Japanese yen strengthened 0.2%. Meanwhile, the PBoC continued its effort in setting firmer-than-expected yuan fixing. The midpoint of official fixing on Thursday was at 7.1798, or 1,441 pips stronger than Reuters’ estimate of 7.3239. This was ahead of a long holiday starting today for MidAutumn Festival and National Day holiday and trading will resume on 9th October. The AUD also took advantage from the weaker dollar by posting 1.2% gains to settle at 0.643. This is after monthly inflation indicator released on Wednesday in Australia rebounded to 5.2% y/y in August from 4.9% y/y in the prior month, which highlights that inflation risk in the country remained tilted towards the upside.

MYR: The ringgit depreciated 0.4% to close slightly above the 4.70-level on Wednesday ahead of the mid-week holiday. Higher US rates and concern of a partial US government shutdown sustained demand for the greenback.

Other Markets

Gold: Gold Price Fell 0.5% as USD and Bond Yields Pulled Back From Recent Highs.

Crude Oil: Oil prices retreated slightly but remained elevated above USD95 per barrel, which piled pressure on financial markets. Brent fell 1.2%.

FBM KLCI: The FBM KLCI fell 0.4% before the holiday. Foreign investors and local retailers were the net buyers with RM27.3 million and RM36.3 million flow, respectively.

US Equities: Wall Street closed slightly higher as the Dow Jones rose 0.3%, S&P500 climbed 0.6% and Nasdaq rose 0.8%.

Source: AmInvest Research - 29 Sept 2023