Snapshot Summary…

Global FX: Dollar rose in tandem with higher UST yields ahead of US inflation data

Global Rates: US Treasuries closed weaker amidst cautious trading and upbeat data from China and Japan

MYR Bonds: The MYR government bond remains supported especially on the back end of the curve

USD/MYR: The ringgit appreciated slightly amidst better regional currency performance

Macro News

Japan: The country's gross domestic product (GDP) expanded by 0.4% y/y in the fourth quarter of 2023, falling short of the consensus of 1.1% y/y growth. Earlier estimate data had indicated a 0.4% contraction. The economy had previously contracted by 3.3% y/y in the third quarter. This means that Japan successfully avoided a technical recession as revised data revealed that the economy experienced growth in the fourth quarter of last year, primarily driven by strong capital expenditure. However, the upward revisions were less than anticipated, with private consumption remaining weak.

China: In February 2024, China saw its consumer prices grow by 0.7% y/y, surpassing market expectations of a 0.3% rise and reversing a significant 0.8% decline observed in January. This was the first instance of consumer inflation since August 2023, reaching an 11-month high, largely driven by robust spending during the Lunar New Year holiday. Food prices decreased by 0.9%, the smallest decline in eight months, while non-food inflation surged to 1.1%. Notably, clothing, housing, health, and education prices all saw increases, while the decline in transport prices notably moderated.

Fixed Income

Global bonds: Treasuries closed weaker overnight. There was some pressure coming from strong China inflation data and upward revision to Japan’s 4Q2023 GDP. Meanwhile, with the US CPI release due later in the week, the cautious sentiment for bonds prevailed. Ahead of the CPI, the New York Fed's Survey of Consumer Expectations showed no change in its one-year-ahead inflation expectations (3.0%) while the three-year outlook rose to 2.7% from 2.4% and the five-year was hiked to 2.9% from 2.5%.

MYR Government Bonds: The local government bond market remains supported especially on the back end of the curve after US bonds rallied last Friday amid the higher US unemployment data. All eyes will be on the reopening of the MGS 11/33 with the expectation that MYR 5.0 billion to be issued.

MYR Corporate Bonds: The local corporate bond market closed mixed yesterday but we still noted higher grade AAA and AA1 papers being supported. Larger flows includeAA1 rated 06/27 Genting Cap at 4.56% (-1 bp) and short-dated 10/24 Amanat (AAA) at 3.59% (-6 bps).

Forex

United States: On Monday, the DXY rose marginally by 0.2%, rebounding from the two-month low-level last Friday. This rise was partly supported by the increase in the 10Y Treasury note yield, which slightly improved the dollar's interest rate differentials. This week, market players are awaiting Tuesday's US CPI report, which is anticipated to influence the Federal Reserve's interest rate decisions in the upcoming months.

Europe: The EUR saw a slight decline, continuing the downward trend from last Friday's dovish comments by European Central Bank (ECB) officials. The ECB is expected to begin reducing interest rates as early as June (while some officials entertained the idea of an April rate cut). Meanwhile, the GBP fell 0.3% amidst a stronger dollar.

Asia-Pacific: The Japanese yen had modest gains against the USD, driven by increasingly anticipating that the BoJ might begin to scale back its ultra- accommodative policy monetary stimulus, which has been in place since the early 1990s to stimulate domestic pricing pressures. Recent signs of rising wages and pricing pressures suggest that these economic conditions may be sustainable. In China, the yuan firmed as well by 0.1%. China concluded a week-long session of the National People's Congress (NPC), where leaders acknowledged the need for further measures to rejuvenate the sluggish economy. The economy has been impacted by a struggling housing market, weak domestic demand, and record-high youth unemployment. Over the weekend, China’s consumer prices grew after months of deflation and beating market forecasts due to robust spending during the Lunar New Year.

Malaysia: The ringgit opened at 4.680 and finished the day at 4.682 after reaching as weak as 4.688. On day-to-day changes, the ringgit appreciated by a marginal 0.04% as a reaction to the mixed US labour market data last Friday. This is also in tandem with better regional market currencies.

Other Markets

Gold: Despite the higher dollar and yields, gold price edged up 0.2% to USD2,183/oz as traders remained focused on US Fed rate cut narratives.

Crude oil: Oil prices were mixed with Brent inching higher while WTI dipped slightly as investors mulled over the ongoing Middle East tension against Chinese weak demand.

Source: AmInvest Research - 12 Mar 2024