Snapshot Summary…

Global FX: Dollar rose slightly on Friday, completing the weekly gains

Global Rates: US Treasuries posted losses with more losses seen on the front to the belly part of the curve

MYR Bonds: The local government bond market weakened further by another 1-2 bps

USD/MYR: The ringgit generally was in line with regional currencies, showing weakness against the dollar

Macro News

China: On Friday, China’s central bank, the People’s Bank of China (PBoC), left its rate on 387 billion yuan (USD53.8 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.50%, unchanged from the previous operation, as policymakers continue to prefer currency stability amidst uncertainty on the timing of the execution of rate cut by the US Fed. With 481 billion yuan worth of MLF loans set to expire this month, the operation resulted in a net 94 billion yuan fund withdrawal from the banking system.

United States: The University of Michigan consumer sentiment survey showed its headline reading edged lower to 76.5, the lowest in three months and slightly below the forecast of 76.9. The number is moving away from January’s 79, which was the highest level since July 2021.

Fixed Income

Global bonds: US Treasuries were pressured lower with losses seen more pronounced on the front to the belly part of the curve as yields climbed 3 – 4 bps. This can be attributed to the higher manufacturing production growth at 0.8% m/m in February, compared to 0.3% m/m expected, and also cautious sentiment among market players ahead of the key Fed meeting this week. The losses were also led by bear flattened Bund and Gilt curve on Friday.

MYR Government Bonds: The local bond market weakened further by another by 1- 2 bps from short to the belly of the curve following 10Y UST yields rose after the release of recent US inflation data which suggests the situation remains sticky there.

MYR Corporate Bonds: We noticed there was heavy flow in the PDS space at MYR1.1 billion trading volume on Friday, with most of the volume concentrated on higher quality papers such as GGs, AAAs, etc. Among notable trades were MYR20 million on 02/48 Danainfra Nasional, done at 4.18%, MYR10 million on 10/28 Pengerang LNG (AAA) done at 3.85% and MYR30 million on 07/25 Sepangar Bay Power done at 3.70%.

Forex

United States: On Friday, the US dollar rose alongside higher US bond yields. This coincided with the release of US industrial production up 0.1% m/m in February versus the expectation of zero growth. Ahead of this week’s FOMC, the dollar was supported as the Fed is not yet imminently expected to cut rates soon.

Europe: The euro was steady despite the firm dollar on Friday, as markets kept up bids in the euro ahead of the incoming FOMC meeting, receiving support near the weekly low level of 1.087 level.

Asia-Pacific: The yuan held steady against the dollar last Friday after the PBOC kept its one-year medium-term lending facility (MLF) rate unchanged at 2.50%, preventing the yield gap with the US from widening further. In the meantime, the yen dipped below 148.5 against the USD, as markets await the upcoming BoJ policy meeting where speculation is rising that the central bank may soon quit its negative interest rate policy, especially after the significant wage increase by Rengo, Japan's largest trade union. Meanwhile, BOJ Governor Kazuo Ueda has offered a slightly downbeat economic outlook, telling parliament that "Japan's economy is recovering moderately, although weakness has been seen in some data".

Malaysia: The ringgit generally was in line with regional currencies, showing weakness against the dollar after the prior days’ release of upbeat US CPI and PPI data. Sentiment was also cautious before this week’s FOMC meeting.

Other Markets

Gold: Prices held steady on Friday but fell for the week as they readjusted lower from recent record highs. Trading was cautious ahead of FOMC but gold was in demand after last week’s release of strong US inflation data and amid geopolitical risks related to the Russia-Ukraine war.

Crude oil: Prices fell Friday on profit-taking activity after recently hitting four-month highs. The IEA warned that global inventories may tighten this year due to OPEC+ production cuts.

Source: AmInvest Research - 18 Mar 2024