Snapshot Summary…

Global FX: Dollar was on back the footing ahead of series of key data releases this week

Global Rates: Treasuries closed weaker with sentiment guarded ahead of pertinent economic data

MYR Bonds: Government bond yields fell by 2-4 bps to follow prior day’s UST gains

USD/MYR: Ringgit trading continues to be subdued

Macro News

Singapore: Singapore’s manufacturing production expanded 1.1% y/y in January 2024, much less than what market was expecting (+4.5%), but recovering from 2.4% y/y drop in December 2023. The rise can be attributed to the growth in precision engineering, transport engineering, and chemicals.

United States: The sale of new single-family homes in the US grew 1.5% m/m to 661K in January 2024 (cons.: 680K). The reading set a second straight month of monthly growth in sales, coinciding with the drop in mortgage rates this year. The median price of new houses sold was USD420K while the average sales price was USD534K.

Fixed Income

Global bonds: US Treasuries closed weaker with sentiment guarded ahead of pertinent economic data releases this week. The losses were despite US new home sales showing a smaller than expected increase of 1.5% m/m in January versus 3.0% consensus expectation. Data releases to come this week include personal spending, second reading of the 4Q2023 GDP, and the January PCE inflation number. Overnight UST losses include weaker demand at the biggest ever 5Y UST auction (USD64 billion) where BTC was 2.41x (2.49x average past 12 auctions of the same tenor). The 5Y UST auction sizes are set to increase, to USD67 billion in March and estimates of USD70 billion in 2Q2024.

MYR Government Bonds: Government bond yields fell by 2-4 bps across the curve following 10Y UST movement which fell by 10 bps since last Friday as investors are looking ahead to key economic data this week. These include Fed’s favoured inflation gauge, the personal consumption expenditures price index, which is slated for Thursday.

MYR Corporate Bonds: There was mixed movement in the ringgit corporate bond market yesterday. Mostly we noted flows were focused on infrastructure and banking papers with yields moving sideways. Flows were led by 06/37 Tenaga (AAA) at 4.03% (-1 bp), and 10/28 ALR at 3.89% (+2 bps).

Forex

United States: The dollar demand was on the back footing at the start of the week, ahead of series of key data releases including US durable goods (due on Tuesday night) and Fed favoured inflation measure; PCE Price Index (due on Thursday night). These could provide more guidance on how the US Fed will move moving forward. Dixie fell 0.1% to near its intraday low of 103.71.

Europe: The euro gained 0.3%, further away from the recent three months low it reached when the markets toned down its Fed’s rate cut expectations. The ECB President Christine Lagarde last night reiterated cautious the tone amongst policymakers. She said the current disinflationary process is expected to persist though the governing council needs to be confident that the 2.0% will be sustainably achieved. The GBP was supported as well, rising 0.1%.

Asia-Pacific: The CNY saw further weakness, testing 7.198 resistance level again. The PBoC set the yuan fixing at 7.108, 16 pips weaker than the previous fix on Friday, but 918 pips firmer than Reuters estimate of 7.1988. Meanwhile, despite the lower USD, the JPY fell 0.1% to settle Monday at 150.70.

Malaysia: Ringgit trading was subdued as it opened at 4.771 and closed at the same level as the prior session’s level of 4.777. Domestically, investors’ focus will turn towards the Manufacturing PMI report by S&P Global after the headline reading sharply improved for January 2024. Another higher reading could indicate a pick-up in manufacturing sector alongside with global trades.

Other Markets

Gold: Gold fell slightly by 0.2% to close at USD2,031/oz as the UST yields rose.

Crude oil: Brent gained 1.1% while WTI rose 0.1% as the concerns on supply amidst geopolitical tension remains.

Source: AmInvest Research - 27 Feb 2024