Snapshot Summary…

Global FX: The dollar continue to trend higher following Fed meeting minute and
economic data
Global Rates: UST yields were mixed as investors repriced rate outlook
MYR Bonds: Local govvies market closed weaker amidst higher trading volume in the
PDS space
USD/MYR: The ringgit traded weaker again and closed at 4.63-level

Macro News

United States: In the final week of 2023, the average contract interest rate for 30-year
fixed-rate mortgages with conforming loan balances in the US increased slightly to
6.76% from 6.71% in the previous week. This marks the first uptick in borrowing costs
in almost two months but remains close to June lows and below the 23-year high of
7.90% reached in mid-October. The recent increase is attributed to market reactions
to slowing inflation and the potential for rate cuts from the Federal Reserve.
Euro Zone: In December, the number of unemployed people in Germany increased
by 5,000 in seasonally adjusted terms, which was much less than the expected rise of
20,000, according to labour office figures. Despite the slight uptick, the 2023
unemployment rate in Germany was one of the lowest since German reunification.
Malaysia: The Ministry of Economy swiftly addressed a security issue with the Central
Database Hub (Padu) system, where an individual's identity card number could be
used to override and change passwords. The problem was resolved by the Padu team
within one hour on Tuesday, following immediate action. The weakness in
authentication handling was not identified during the Security Posture Assessment
(SPA). The Ministry has taken steps to secure the system and ensure data integrity.

Fixed Income

Global bonds: The UST curve was closed mixed as it found support from the lower
JOLT job openings data at 8.79 million, the lowest level since March 2021, suggesting
loosening labour market. But yields on front and super-long back end of the curve
closed slightly higher following the release of Fed December’s meeting minutes. The
minutes suggested that officials are already tilted towards the dovish side with
concerns about “overly restrictive” policy. However, they remained cautious on any
sharp rate cut call as the forecasts made were associated with an “unusually elevated
degree of uncertainty” with further rate increases still possible. The 2Y UST yield rose
1 bps while 10Y yield fell 1 bps.
MYR Government Bonds: The local bond market’s appetite continued to diminish
following market paring bets on the sizeable rate cuts expectations from Feds last
month. The sluggish MGS market was backed by a continuous upward movement
seen in 10Y UST level (+5 bps) from 3.93% to 3.98% yesterday.
MYR Corporate Bonds: In the PDS space, gainers continue to outpace losers with
more yields moved lower. Trading volume was higher at MYR746 million. Among
notable trades were MYR30 million on 01/35 PLUS (AAA) done at 4.09% and MYR110
million on 12/24 TM Technology Services done (AAA) done at 3.58%.

Forex

United States: The dollar rose 0.3% to 102.49 as market participants started to
question the expectations of multiple rate cuts by the US Fed this year. While lower
JOLT job openings gave some cheers for those betting for early rate cut, a mixed tone
of Fed December meeting minutes suggest Federal Funds rate outlook remained
uncertain.
Europe: The EUR was down 0.2% to 1.092 as market’s focus was turned towards rate
outlook following key US economic data and meeting minutes released. On the other
hand, the GBP rose 0.4% and held steady against stronger dollar as BoE’s tougher
talk on inflation in November and December continue to support the expectations for
‘higher-for-longer’ play for the central bank.
Asia-Pacific: Most of Asian currencies remained on the downside as the yen
weakened 0.9% as Japan’s market remained closed for an extended New Year holiday
and after Western Japan being hit by earthquake which also triggered tsunami
warnings. In China, yuan also depreciated by 0.1% to 7.149. Prior to market opening,
the PBoC set the yuan mid fixing point at 7.1002, slightly weaker compared to previous
fix of 7.0770 (Reuters estimate was 7.1512).
Malaysia: The USD/MYR pair gained 0.6% to settle at 4.633, in tandem with higher
demand towards the dollar. The pair was traded within the range of 4.618 and 4.642.
Market’s repricing of US rates helped pushed the ringgit weaker against the USD.

Other Markets

Gold: Gold prices fell 0.8% to USD2,041/oz as the dollar rose.
Crude oil: Crude oil prices surged with Brent soaring 3.1% and WTI gaining 3.3% after
Libya’s top oilfield was disrupted, adding fears to Middle East conflict which could
disrupt global oil supplies.
FBM KLCI: The FBM KLCI rose 0.6% to 1,462, amidst lower performances on major
and regional bourses. Foreign investors were the net buyers of Malaysian shares with
MYR358.1 million.
US Equities: US equities fell across the board with Dow Jones and S&P500 falling
0.8% and Nasdaq dropping 1.2%.

Source: AmInvest Research - 4 Jan 2024