Snapshot Summary…

Global FX: The dollar was steady as investors continue to monitor Fed officials speeches on clues for rate outlook

Global Rates: UST curve flattened with weaknesses seen along the short tenor while the longer tenors rallied, driven by the FFR peak expectations

MYR Bonds: Slightly less flows were detected in the Malaysian govvies but volume in the PDS market surged

USD/MYR: Ringgit continued its weakening trend amidst mixed regional currencies performance

Macro News

Japan: The index of leading economic indicators in Japan, which is used to gauge the economic outlook for few months ahead, had declined 108.7 in September 2023 from 109.2 in August. The decline was amidst faster contractions in factory activity while the services sector grew the least in nine months. Consumer confidence weakened to a six-month low.

Australia: The seasonally adjusted estimate for building permits approved in Australia contracted by 4.6% m/m to 13,144 units in September 2023 after 8.1% m/m growth in the prior month. The decline was driven by the downturn in private sector dwellings including houses and non-houses. On an annual basis, the building permits dropped 20.6% y/y, slightly higher than the previous month’s reading of 22.3% y/y.

Germany: Inflation in the largest economy in Eurozone was confirmed at 3.8% y/y, the same as its initial estimate but lower than previous month’s 4.5% y/y. It marked the slowest inflation growth in two years, thanks to the drop in food inflation and energy prices. Meanwhile, services inflation was little changed, supported by the growth in rent inflation.

Fixed Income

Global bonds: UST ended with firm gains on the longer part of the curve while the shorter tenors posted modest weakness. The 10Y closed 7 bps lower at 4.49%, down below the 4.50% which was seen last in September. Meanwhile, the 30Y touched a low of 4.62% (-11 bps) which is also the lowest since September. Sentiment for Treasuries were still driven by expectations of peak FFR. WIRP table suggests only a small 9.5% probability of a hike in December. Comments from Fed chair Jerome Powell did not offer anything new to the rates outlook, but Treasuries did react to crude oil prices continuing to fall where Brent fell 2.5% overnight to settle at USD79.54. Aside, gilts and bund yields fell further. ECB policymaker Stournaras said the central bank could cut rates in the second half of next year if inflation falls below 3%.

MYR Government Bonds: Slightly less flows were detected in the Malaysian govvies segment yesterday, but papers generally moved steady. Of these, the 3Y MGS fell 2 bps to 3.50%. Meanwhile, IRS rates also fell, with the 5Y down 2 bps to 3.89%, or 20 bps above the 5Y MGS, suggesting a bias towards stable rates environment, at least in the short-term period, in our view.

MYR Corporate Bonds: Malaysia's corporate bonds were mostly firmer yesterday, as we think traders took advantage of current improved risk appetite in global markets. We noticed that gains were slanted along AAA and AA3/AA- rating segments. Of these, 03/26 PKNS (AA3) fell 6 bps to 4.39%, and another short tenor 12/24 AZRB (AA-) shed 6 bps to close at 4.82%. On the AAA segment, longer tenor 01/35 PLUS fell 5 bps to 4.57%.

Forex

United States: The US Fed Chair Jerome Powell did not comment on monetary policy last night during US central bank statistics conference, although he is expected to deliver another speech at a conference later tonight. At the same time, Fed Vice Chair Jefferson said that uncertainties could warrant an aggressive policy response rather than gradual ones. The DXY index was held steady at 105.59.

Europe: The EUR was up 0.1% to 1.071. Data showed that cloudier outlook on Eurozone’s economic activities as retail sales for September 2023 fell 0.3% m/m, more than what was market expecting at 0.2% decline and marked the third straight months of contractions. The GBP fell slightly by 0.1% to 1.229. Just after the BoE’s economist signalled on possible rate cuts in 2024, the BoE governor Andrew Bailey pushed back against discussion of cutting interest rate as there are still upside risks to inflation especially with regards to energy costs.

Asia-Pacific: Following warnings from China’s central bank, the CNY firmed 0.1% to end the day at 7.276. The PBoC governor Pan Gongsheng said that the central bank will prevent overshooting of the yuan and one-sided bets on the currency. On the other hand, the JPY weakened 0.4% to settle at 150.98, heading back towards levels that investors are watching for currency intervention. The Reuters Tankan sentiment index for manufacturers in Japan improved to +6 in November, from +4 in the prior month, highlighting better business confidence. Although, respondents are flagging tougher conditions in the quarter ahead on high raw material costs and geopolitical risks.

MYR: The ringgit weakened again for the second day, posting 0.3% losses reacting to the higher dollar from the previous session and as investors remained on the lookout for any hint of further rate hike from Fed speeches. Malaysia’s unemployment rate remained unchanged at 3.4% for September, marking the fourth months of unchanged unemployment rate.

Other Markets

Gold : Gold retreated again for the third day as investors are on the look out for fresh cues on interest rate outlook amidst heavy Fed speeches week. Gold prices fell 1.0% to USD1,950/oz.

Crude oil : Oil prices dropped with Brent sank 2.5% while WTI tumbled 2.6% as the market is worried over demands concerns from China following mixed external trade data recently.

FBM KLCI: The local bourse’s KLCI fell 0.4% to 1,458 led by losses in banking counters. Data showed from foreign investors were the net buyers with MYR100.4 million.

US Equities: Wall Street stock markets closed mixed as the Dow Jones fell 0.1% but S&P500 rose 0.1% and Nasdaq climbed 0.1%.

Source: AmInvest Research - 9 Nov 2023