Snapshot Summary…

Global FX: USD rose to 107-level while JPY gained on reported BoJ intervention

Global Rates: UST yields reached fresh multi-years high on hawkish tone and positive labour market data

MYR Bonds: MGS/GII market was under pressure, in line with weak global sentiment

USD/MYR: Ringgit weakened to its lowest level since last November

Macro News

United States : In August 2023, the number of job openings in the United States increased significantly by 690,000, reaching a total of 9.61 million. This surge in job openings was observed across various sectors, including professional and business services, finance and insurance, state and local government education, nondurable goods manufacturing, and federal government.

Australia : The Reserve Bank of Australia (RBA) kept its benchmark cash rate unchanged at 4.1% during the latest meeting. This marks the fourth consecutive month status quo decision. The RBA noted that while inflation had peaked, it remains high and is expected to stay elevated for some time. They suggested that further monetary tightening might be necessary to bring inflation back into the target range of 2 to 3% by late 2025.

Malaysia : Malaysia's economy is expected to remain strong in 2024, driven by domestic activities. The labour market is improving with better employment and wages, enabling households to spend more. Additionally, both private and public sector investments are on the horizon, further boosting the economy, according to Bank Negara Malaysia Governor in his latest speech yesterday.

Fixed Income

Global bonds: Sell-off in the UST market persisted following another hawkish tone communicated by US Fed officials. Atlanta Fed Raphael Bostic stated that he believes rates will stay at a high level for an extended period while Cleveland Fed Loretta Mester thinks that another rate hike is on the table. Also, the Aug JOLTS job openings number rose unexpectedly by 690K to 9.610 million, highlighting that labour market remains strong. At the same time, weaker sentiment was also seen in the Bund market though shorter tenor was fairly supported. Bund 10Y yield climbed 5 bps to close at near the 3.00% level. Amidst lack of data drive, hawkish statement by ECB Chief Economist Philip Lane was in line with “higher-for-longer” narrative. The JGB on the other hand, saw mixed performance after the 10Y yield hit its highest in a decade recently and following the BoJ announcement to buy an unspecified amount of JGBs.

MYR Government Bonds: Ringgit bonds traded weaker as the selloff resume in the global bond space after US government avoided a shutdown and further supported by a much higher US Manufacturing PMI figure as surveyed by S&P with the production picking up and employment rebounded. MGS/GII yields edged higher by 2-5 bps with the 7Y yield moving the most. BNM also announced the reopening of 20Y MGS 10/42 with a larger than expected issue size of MYR3.5 billion plus MYR2.0 billion private placements. WI was last seen quoted at 4.43 - 4.33%.

MYR Corporate Bonds: Volume traded in the PDS market was lower at MYR471 million vs. prior session MYR608 million. Generally, there were mixed performances with gainers mostly concentrated on lower rated papers. Among notable trades were MYR10 million (GG rated) Prasarana 02/51 done at 4.52%, MYR50 million on 04/31 Sarawak Energy (AAA rated) done at 4.17% and MYR30 million on 08/28 Sime Darby.

Forex

US: The US dollar kept up strength overnight though its appreciation was pared as it held just above the 107 level. Support for the dollar came from the release of the JOLTS data and hawkish talk from Fed officials.

Europe: The EUR fell as the USD sustained strength despite comments from ECB officials that should be construed as being hawkish. European Central Bank policymakers comprising Simkus, Lane, and Valimaki all spoke in favour of keeping rates at a restrictive level. Meanwhile, the GBP fell to below 1.21, which it had not seen since 1Q this year.

Asia-Pacific: The yuan weakened further amid thin trading due to the week-long National Day holiday, rising above 7.30 on Tuesday. Aside, the strong dollar, though finding late resistance around 107.2, saw USD/JPY briefly reaching above 150 before sliding lower towards 149.05 during the US morning session. Reuters reported that the sharp decline suggested BoJ intervention. Nevertheless, intraday DXY strength after the JOLTS data release could also explain earlier USD/JPY rise. The Australian dollar was pressured after the RBA left interest rates unchanged, though further tightening might still be needed.

MYR: Continued dollar demand which saw the DXY index rising above 107 during the Asian session yesterday meant a weaker ringgit. USD/MYR closed 0.1% higher to 4.724, reaching its highest point since last November. Meanwhile, it was reported that BNM governor expects inflation to continue to trend lower and BNM will continue to monitor potential risks to inflation outlook, arising mainly from changes to domestic policy on fuel subsidies.

Other Markets

Gold: Gold prices fell 0.3% to below USD1,830 level as the dollar gained and amidst concerns over the hawkish Fed

Crude Oil: Crude oil prices rose on Tuesday with Brent advanced .2% while WTI climbed 0.5%, aided by continued worries over supply and release of firm US jobs data.

FBM KLCI: The KLCI closed modestly firmer yesterday while regional stock markets were mixed. Foreign investors were net sellers of MYR39.3 million Malaysian shares

US Equities: US stocks fell as investors were watching the continued surge in bond yields. Losses were led by tech companies. Both the DJIA and S&P fell by <1%.

Source: AmInvest Research - 4 Oct 2023