AmInvest Research Reports

Fixed Income & FX Research - 30 Nov 2023

AmInvest
Publish date: Thu, 30 Nov 2023, 10:58 AM
AmInvest
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Snapshot Summary…

Global FX: The dollar was little changed amid Fed rate cut bets, but markets were cognizant of better US 3Q2023 reading

Global Rates: Major bond markets closed firm on hopes for a dovish Fed

MYR Bonds: Local bond market continued to be guided by declining global, especially US, bond yields

USD/MYR: MYR was steady to test 4.650 as USD remained pressured

Macro News

United States : The US economy expanded at an annualized rate of 5.2% in 3Q2023, surpassing the preliminary estimate of 4.9%. Non-residential investment was revised upward, showing a 1.3% increase, with improvements in equipment and a surge in structures. Residential investment, rising for the first time in nearly two years, exceeded the initial estimate. Private inventories contributed positively to growth, and government spending increased at a faster pace. Consumer spending, while slightly less than initially estimated, still marked the largest gain since 4Q2021.

United Kingdom: Consumer credit in the United Kingdom grew by GBP1.289 billion in October 2023, marking the smallest increase in five months. The ease was attributed to reduced net borrowing through credit cards, which dropped from GBP0.6 billion in September to GBP0.5 billion in October.

Australia : The monthly Consumer Price Index (CPI) indicator in Australia increased by 4.9% in the year to October 2023, slowing from September's five-month high of 5.6%. The decline in annual inflation was attributed to softer rises in transport prices, housing, furnishings, household equipment & services, and recreation and culture. However, inflation accelerated for food and non-alcoholic beverages, driven by higher fruit & vegetable prices. Clothing and footwear prices fell faster. The monthly CPI indicator, excluding volatile items and travel, rose by 5.1% in October, remaining well above the RBA's target range of 2-3%.

Malaysia: Malaysia has secured investment commitments amounting to RM347 billion from official visits by Prime Minister and trade and investment missions to various countries. These commitments were obtained during trips to China, Singapore, Japan, South Korea, the United Arab Emirates, Saudi Arabia, and the United States. The Prime Minister highlighted the significance of these substantial investment commitments, attributing them to the collaborative efforts of government agencies, including the Ministry of Investment, Trade, and Industry.

Fixed Income

Global bonds: UST closed with firm gains as the 10Y shed 7 bps to close below the 4.30% level. The market further solidified outlook for a dovish Fed. Despite the firm GDP reading, traders noted the Fed's Beige Book for November which indicated economic activity slowed since the October report, as four Fed districts showed modest growth, two reported little change, while six reported declining activity. Yet, Fed-speak was where Richmond Fed President (2024 FOMC voter) Barkin said that he is not ruling out the potential need for another rate hike. European bonds also rallied. Germany’s November CPI fell 0.4% m/m (consensus -0.2%; last 0.0%) but was up 3.2% y/y (expected 3.5%; last 3.8%).

MYR Government Bonds: Local bond market continued to be guided by declining global, especially US, bond yields. Buying interests were evident across the curve, leading to a bull steepening move as yields fell by 2-5 bps. The robust reopening auction of 7Y GII 09/30 further supported sentiment, boasting an BTC ratio of 3.3x, and averaging at 3.897%.

MYR Corporate Bonds: PDS market saw slightly thinner flows from the day before, but bonds mostly ended with lower yields yesterday. Traded volume fell to MYR545 million from MYR634 million. Notable trades include 03/24 Danainfra (GG) at 3.21% or down 9 bps, and 05/36 Danainfra which fell 20 bps to 4.10%.

Forex

United States: The dollar closed little changed as Fed rate cut bets for the coming year was sustained by markets were cognizant of better US 3Q2023 reading and less-than-encouraging Fed Beige Book report. Even though markets are staging for Fed cuts next year, short-term risks remain amid mixed-to-hawkish Fed-speak (despite earlier this week’s Waller comments on rate being on hold rest of this year).

Europe: Against the firm USD, the EUR and GBP fell. BoE Governor Bailey said that now is not the time to discuss rate cuts while ECB policymaker Stournaras said that a rate cut by April 2024 may be optimistic, but a cut could take place near mid of 2024.

Asia-Pacific: Dollar weakness during the Asian session continued to benefit Asian currencies. USD/CNY fell 0.1% to with the PBoC set the fixing at firm level of 7.1031. PBoC recently pledged to allay ‘overshooting’ of risks in CNY. Meanwhile, USD/JPY fell 0.2%. BoJ policymaker Adachi said that policy easing needs to continue and that the recent modifications to the central bank’s yield curve control policy is not a signal of rate hiking.

Malaysia: The ringgit was steady yesterday when the USD/MYR fell to test 4.650 as markets’ expectation for dovish Fed continued to strengthen. However, we expect cautious sentiment in the ringgit ahead of US CPE inflation data release.

Other Markets

Gold : Gold prices extended its gains above the USD2,000/oz level as traders sustained bets on Fed pausing its rate hike path.

Crude oil: Oil prices rallied with both Brent and WTI surging amid reports OPEC+ will deepen supply cuts as delegates meet this week.

FBM KLCI: The FBM KLCI closed lower for a third straight day, going alongside weaker regional bourses as well.

US Equities: US stock markets closed mixed as investors paused after the recent rally. Dow Jones was little changed, S&P500 fell 0.1% and Nasdaq fell by 0.2%.

Source: AmInvest Research - 30 Nov 2023

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