Snapshot Summary…

Global FX: Dollar demand firms to follow the uptick in the UST yields

Global Rates: US Treasuries posted losses with yields approaching past month highs, reacting to the hotter-than-expected PPI data

MYR Bonds: Malaysian government securities market closed weaker again yesterday

USD/MYR: The ringgit trading range was subdued as market players were cautious ahead of key data

Macro News

United States: The February US Producer Price Index (PPI) saw a 0.6% m/m increase compared to the previous month, its highest growth since August. This exceeded the anticipated rise of 0.3%. The price of goods climbed by 1.2%, with a significant 4.4% jump in energy costs and a 1.0% rise in food prices. Excluding volatile items like food and energy, the core PPI rate rose by 0.3%, slightly decelerating from January's 0.5% but still above the expected 0.2%. Meanwhile, retail sales in the United States grew 0.6% m/m, following a revised decline of 1.1% in January. This growth was below the anticipated 0.8% rise, suggesting a potential moderation in consumer spending.

Malaysia: Recently, data from DOSM showed that the sales value of the wholesale & retail trade sector in Malaysia for January 2024 reached RM142.4 billion, marking a 5.4% y/y increase. This growth was driven by gains across all sub-sectors: Motor Vehicles (16.0%), Wholesale Trade (5.5%), and Retail Trade (2.6%). In terms the volume, the Wholesale & Retail Trade sector saw a 3.5% growth y/y supported by increases in Motor Vehicles (12.1%), Wholesale Trade (4.0%), and Retail Trade (1.4%).

Fixed Income

Global bonds: US Treasuries posted losses with yields approaching past month highs as players reacted to the strong February PPI release of 0.6% m/m. The yield surge occurred despite the weaker-than-expected US retail sales increase of 0.6% m/m versus 0.8% expectation. Bund and Gilt yields also rose post-US data release.

MYR Government Bonds: Malaysian government securities market closed weaker again yesterday but flows along the benchmark MGS papers were thin. Most of the flows occurred along off-the-run MGS as well as GII securities. Meanwhile, the auction of MGS 11/33 garnered healthy demand where the MYR5.0 billion tender received BTC of just over 2.0x.

MYR Corporate Bonds: The corporate bond market saw modest gains. Interest continued to be focused on higher rated names. Heavier flows were seen on papers such as 05/28 and 11/28 GENM Cap (AA1) which realigned at 4.56% and 4.58% respectively.

Forex

United States: Dollar chalked up larger gains by the end of the session to follow suit with the jump in US Treasury yields after factory prices grew faster than expected. Furthermore, there was a surprise drop in initial jobless claims at 209K vs. market consensus at 218K and the prior week's reading of 210K. These data bolstered the expectations that the Fed will delay its rate cut narrative.

Europe: Against the firmer dollar, the euro fell and at the same time, was also pressured by higher expectations of an impending rate cut following Dutch Central Bank Governor Klaas Knot's statement saying the ECB could cut the key interest rates at least three times this year starting from June if the upcoming wage data continue to be on the expected trajectory. The GBP also shed 0.3% but some supports were seen from recent modest January GDP growth.

Asia-Pacific: The Japanese yen weakened 0.4% amidst a stronger dollar day and market players were cautious trading ahead of wage negotiations outcome by Rengo or Japanese Trade Union Confederation, which could steer the policy path for the BoJ in exiting its negative interest rate policy. The average increase demanded by its affiliated unions was 5.85%, the largest increase since 1993. In the meantime, the yuan depreciated again for the third straight session after the PBoC set the yuan fixing weaker 0.1% at 7.0974 than the previous day’s fix.

Malaysia: The ringgit was closed Thursday at 4.686 amidst a subdued trading range of 4.683 – 4.690 as market players were rather cautious ahead of key US data after hours and as a reaction from last night’s stronger-than-anticipated PPI and initial jobless claims data, we are of the view that the ringgit could weaken to 4.700 level today.

Other Markets

Gold: Gold price slipped 0.6% to USD2,162/oz as the UST yields and dollar demand upswing.

Crude oil: Oil prices gained to their highest level since October 2023 after the International Energy Agency warned of a supply deficit in 2024, reversing the previous surplus forecast if OPEC+ continue to cut its output in the second half of 2024. Brent rose 1.7% while WTI climbed 1.9%.

Source: AmInvest Research - 15 Mar 2024