Fixed Income & FX Research 

Snapshot Summary…

Global FX: Dollar gained 0.2% to close at 106.53 on the back of firm data

Global Rates: Treasuries closed weaker though the front of the curve saw limited yield movement

MYR Bonds: Due to a lack of fresh drivers, government bonds moved in a tight range

USD/MYR: Ringgit gained as technicals point to oversold levels

Macro News

United States : In September, sales of new single-family houses increased by 12.3% to an annualised rate of 759K, driven by a shortage of existing homes, which increased demand for new housing. The median price for new homes sold was USD418,800, and the average sales price was USD503,900, slightly lower than a year ago.

Euro Area : Bank lending to households in the Eurozone increased by 0.8% y/y in September. This was the slowest since June 2015. The deceleration in lending can be attributed to the decreased demand for credit, which has been influenced by the European Central Bank's tightening of monetary policy in recent months.

Australia : Inflation rate dropped to 5.4% y/y in the 3Q2023, down from 6.0% in the previous period. The slowdown was primarily driven by reduced inflation in both goods and services. Goods inflation reached a nearly two-year low of 4.9%, down from 5.8% in 2Q2023 with food and furniture contributing to this decline. Services inflation also decreased to 5.8% from 6.3%, hitting its lowest point since 3Q2022. Softer price increases were observed in areas like hairdressers' services, financial services, restaurant meals, and holiday travel.

Malaysia : Malaysia's leading economic index rebounded with a 0.7% increase m/m in August 2023, recovering from a 0.8% decline in the previous month. This turnaround marked the first growth after two consecutive months of decline. The improvement was driven by various factors, including recoveries in real money supply (M1), real imports of semiconductors, real imports of other basic precious and non-ferrous metals, the number of housing units approved, and the number of new companies registered.

Fixed Income

Global bonds: Treasuries closed weaker though the front of the curve saw limited upward yield movement from a day earlier. The 2Y UST moved up 1 bp to 5.12% while the 10Y rose 13 bps to close at 4.95%. UST reacted to strong new homes sales data, which increased 12.3% m/m in September to a seasonally adjusted annual rate of 759K from an upward revised 676Kin August. That was the strongest rate of sales since February 2022. Meanwhile, Germany's October Ifo Business Climate index rose to 86.9 from 85.8 previously and vs expectation of 85.9. Bunds fell as the 10Y rose 6 bps.

MYR Government Bonds: Due to a lack of fresh drivers, Malaysian government bonds moved in a tight range yesterday. Most benchmark papers were little changed though the 3Y MGS shed 2 bps to close at 3.68%. The 10Y MGS closed unchanged at 4.12% but is up 5 bps from a week ago. Reflecting the cautious tone flows were heavier on the front of the yield curve.

MYR Corporate Bonds: There was better buying interest in the ringgit corporate bonds market after the past week of losses. Volume traded was also heavier, doubling up from the previous day. However, the heavier traded papers yesterday were mostly traded weaker. These include 04/32 Infracap Resources (AAA) dealt last at 4.52% (+8 bps), and 07/33 Johor Corp (AAA) at 4.49% (+11 bps

Forex

United States: The DXY index gained 0.2% to close at 106.53 on the back of firm data, including prior day’s firmer US business activity indicators. Both the S&P Global Manufacturing and Services PMI improved in October compared to September’s reading, suggesting the resiliency of the US economy.

Europe: As the dollar rose, the EUR fell 0.2%. The common currency’s losses were capped by the improvements in Germany’s Business Climate Indicator for Germany at 86.9 in October 2023 from 85.8 in the prior month and marking the first increase since in six months. Investors also were in a cautious mode ahead of the ECB policy meeting later today with an expectation of no changes in its interest rate. At the same time, the GBP fell 0.4%, extending previous day’s losses on soft economic data released recently, increasing recessionary risks.

Asia-Pacific: CNY depreciated again by 0.1% to 7.317 despite the stronger-thanexpected yuan fixing at 7.1785, which is 1,428 pips firmer than Reuters estimate. On another note, as much as CNY1 trillion sovereign bond issuance was approved by China’s top parliament body, alongside with passing a bill to allow local governments to frontload part of their 2024 bond quotas. These measures seemed to be pro-growth and are expected to help prop up the Chinese economy going into 2024. Meanwhile, the JPY depreciated 0.2% to close near its intraday high at 150.23 as traders continue to watch over intervention risks. On the data front, Japan’s leading economic index improved to 109.2 in August 2023, up from 108.2 in the prior month.

MYR: The ringgit strengthened 0.1% to close at 4.781 after it reached an intraday high of 4.790. Investors consolidated gains from the USD/MYR pair after the currency crossed its oversold threshold in the Relative Strength Index (RSI) indicator since last week. Near term, the situation on USD strength remains fluid in the build-up to the upcoming FOMC meeting next week.

Other Markets

Gold: Gold price rose on safe-haven demand as conflict in the Middle East escalates further despite US President Biden urging for peace. Gold rose 0.45 to USD1,980/oz.

Crude Oil: Both Brent and WTI surged 2.3% and 2.4% on the back of geopolitical concerns.

FBM KLCI: Local bourse rose 0.5% on bargain-hunting activity to close the day at 1,443. Local institutions bought a net RM178 million Malaysian shares throughout the session.

US Equities: Wall Street closed in red as the Dow Jones fell 0.3%, S&P500 dropped 1.4% and Nasdaq tumbled 2.4% after Google parent Alphabet reported disappointing revenue especially on its cloud services division.

Source: AmInvest Research - 26 Oct 2023