Snapshot Summary…

Global FX: The dollar falls to pare some gains made last Friday

Global Rates: US Treasuries falls on suspected profit-taking activity amidst lack of data day

MYR Bonds: The local bond market was flat despite Malaysia's CPI beating expectations

USD/MYR: The ringgit firms, aided by the upside in CNY and a weaker dollar

Macro News

United States: In February 2024, sales of new single-family homes in the U.S. experienced an unexpected decline, attributed to a rise in mortgage rates during the month. The headline number fell by a slight 0.3% m/m to 0.662 million after a 1.7% m/m growth in the prior month. However, the overall trend in new home sales remains robust, supported by a persistent shortage of existing homes on the market. The Commerce Department's report also highlighted that the median price of new homes in February was the lowest in over two and a half years, with the supply reaching its highest level since November 2022.

Malaysia: Malaysia's inflation rate rose to 1.8% y/y in February 2024, following three months of stability at a rate of 1.5%. This rise was primarily driven by notable increases in the key categories of Housing, Water, Electricity, Gas & Other Fuels (2.7% in February 2024, up from 2.0% in January 2024), Recreation, Sport & Culture (1.6% in February 2024, up from 0.8% in January 2024), and Transport (1.2% in February 2024, up from 0.7% in January 2024). Core inflation, which measures changes in the prices of all goods and services, excluding the volatile prices of fresh food and government- administered prices, also increased to 1.8% y/y in February 2024, mirroring the headline national inflation rate. We believe that the latest inflation print signals a turning point for inflation in the coming months and year amid a slew of incoming supply-side pressures.

Fixed Income

Global bonds: US Treasuries fell on suspected profit-taking activity on a day when there was little news flow and fresh data to guide sentiment. We noted Chicago Fed President Goolsbee (non-voter), who said he anticipates three rate cuts this year. In contrast, we heard last week that Atlanta Fed Bostic (voter) anticipates only one rate cut this year amid persistent inflation. Bunds fell alongside the UST losses. However, we noted that ECB policymaker Scicluna mentioned the possibility of a first-rate cut by April versus other ECB officials who pointed out it would be in June.

MYR Government Bonds: The local bond market was flat despite Malaysia's CPI beating expectations at 1.8% (expected around 1.5%). Meanwhile, flows were slanted around shorter-tenure bonds (1-5Y) following guidance from the Fed that three interest rate reductions are still on the cards this year.

MYR Corporate Bonds: The Ringgit corporate bond market was dealt mixed yesterday. The day was marked by debuts of non-rated STJ maturing 27-29 at 6.14%- 6.17%. The day also saw bids on select GG Danainfra and Prasarana, including Prasa 08/34 and 01/37 at 3.91% and 3.97%, respectively, each down 1 bps.

Forex

United States: The dollar fell 0.2% to start the week on the back footing, paring some of Friday’s gains amidst lack of data guidance. However, the fall in new home sales and continuous negative readings on Texas manufacturing indicators by the Dallas Fed may have pressured the dollar.

Europe: The EUR rose 0.3% against the weaker dollar, though the gains were limited by a dovish-sounding speech by ECB Board Member Fabio Panetta, noting that there is an increasing agreement the governing council of a possible rate cut underpinned by the inflation in the European Union is “quickly falling towards 2.0% target”. The British pound was also on the upside, rising 0.3% on the day.

Asia-Pacific: The Chinese yuan rose by 0.2%, driven by dollar sales by state-owned banks, and the sharp losses reversed last Friday. In Japan, the yen was relatively muted after top Japanese currency official Kanda said the government would take any appropriate actions against excessive currency speculation in the market.

Malaysia: The ringgit firmed 0.3% to 4.724 and traded within the range of 4.724 – 4.743, aided by the upside in CNY and the weaker dollar. On the data front, Malaysia’s inflation ticked slightly higher to 1.8% y/y, beating the market forecast of a tepid 1.4% y/y.

Other Markets

Gold: Gold prices gained 0.3% to USD2,172/oz as market players expect the US Fed to cut interest rates this year.

Crude oil: Crude oil prices surged, with Brent surging 1.5% and WTI rising 2.2% on supply concerns after Russia cut its oil output and persisting geopolitical tension.

Source: AmInvest Research - 26 Mar 2024