AmInvest Research Reports

Fixed Income & FX Research - 05 Mar 2024

AmInvest
Publish date: Tue, 05 Mar 2024, 10:15 AM
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Snapshot Summary…

Global FX: Dixie resumed its bearish trend at the start of the week but still not far off from Friday’s close

Global Rates: UST market consolidated last week’s gains as traders await pertinent key data and Powell’s testimony

MYR Bonds: The local government bond rallied, following the rally in UST market last week

USD/MYR: Ringgit firmed as dollar demand was sluggish

Macro News

South Korea: Retail sales in South Korea grew 0.8% m/m in January 2024, faster than prior month’s 0.6% m/m gains. At the same time, its industrial production grew faster at 12.9% y/y, compared to 6.1% y/y in December 2023 and beating market forecast of 9.3% y/y. Taken together, all these are pointing towards robust economic uplift at the start of the year despite global uncertainties.

Australia: The seasonally adjusted estimate for total dwelling approvals in Australia experienced a month-on-month decrease of 1% to 12,850 units in January 2024, following a revised decrease of 10.1% in December, contrary to market forecasts of a 4% increase. This downturn was primarily attributed to a significant decline in approvals for private sector houses, which fell by 9.9% to 7,461 units. Conversely, approvals for private sector dwellings, excluding houses, saw an increase of 19.5% to 5,238 units.

Fixed Income

Global bonds: The UST market consolidated last week’s gains as traders await for key labour market data and Jerome Powell congressional testimony in front of House Financial Services Committee on Wednesday and Senate Banking Committee on Thursday. By the end of the session, the UST yield curve flattened with larger rise was seen on shorter tenors. In the meantime, Bunds closed mixed in anticipation of key ECB policy meeting.

MYR Government Bonds: Local bond performance was underpinned by the rally seen in the UST market which prompted yields to fall by 7 – 13 bps last week as some fresh US economic data supports the narrative that activity and consumption are cooling fast enough to allow the Fed to start cutting rates in June. This caused the MGS/GII curve to trade lower by 1 – 2 bps yesterday with front part of the curve being most actively traded.

MYR Corporate Bonds: Flows in the PDS were slightly heavy with MYR746 billion volume traded and bullish trades outpaced bearish ones. Among notable trades were the MYR10 million on 01/26 EKVE (AAA) done at 3.91%, MYR15 million on 03/27 Zamarad Assets (AAA) done at 3.997%, and MYR1 million on 12/27 Affin Islamic Bank done at 4.05% (AA3).

Forex

United States: The US dollar remained sluggish, closing overnight little changed at 103.83. There were some support for the greenback but sentiment was weak ahead of pertinent data releases and Fed chair Powell's testimony to Congress. Support for USD came from Atlanta Fed President Bostic (FOMC voter) who said the first rate cut is set for the 3Q2024 but that will be followed by a pause, in lieu of lower rates boosting demand exuberance in markets.

Europe: The EUR was aided by data and the sluggish USD. The Eurozone Sentix Investor Confidence index for March was released at -10.5, up from -12.9 the month before, and against expectation of -10.8. EUR/USD rose 0.2% to 1.086, and should remain supported ahead of the ECB meeting this week where consensus expectation is for the central bank to hold interest rates steady. GBP also gained over the USD, up 0.3%. In the UK this week, there is presentation of the government's Spring Budget by Chancellor Jeremy Hunt.

Asia-Pacific: In China, with eyes on the National People's Congress, the CNY saw cautious trade which was also made possible by the sluggish USD. USD/CNY was little changed yesterday at 7.199. Meanwhile, in Japan, the JPY remained weak. Sentiment for JPY was still affected by dovish comments from BoJ governor Kazuo Ueda who sees little change to inflation levels.

Malaysia: The ringgit posted more gains including along the crosses. This was amid a lack of support for the dollar ahead of this week’s US data releases. There was also better sentiment ahead of MPC this week (consensus is for BNM to hold) and China’s government congress which is expected to detail out plans to boost the economy.

Other Markets

Gold: Prices rose to a record, above USD2,100. Gold is aided by sluggish dollar and increased expectations that the Fed will indeed begin to cut rates mid of this year.

Crude oil: Oil rose especially the WTI. Prices remained supported by worries over supply, on the news of OPEC+ output cuts into 2Q2024.

Source: AmInvest Research - 5 Mar 2024

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