Snapshot Summary…

Global FX: The dollar fell alongside higher initial jobless claims

Global Rates: US Treasuries yields drop on safe haven bid due to concerns about geopolitical tension

MYR Bonds: The local government bond market recovered to follow selected UST yields retraced from the prior session’s high

USD/MYR: The ringgit was similarly helped by the lower dollar movement performances

Macro News

Australia: Australia’s latest Building Approvals data released by the Australian Bureau of Statistics (ABS) showed a decline of 1.9% m/m to 12,250 units during February 2024, an improvement from 2.5% m/m drop in the prior month but worse than 3.3% m/m growth, a figure that market was expecting. This is despite the 10.7% m/m private house approvals. The residential sub-sector currently constrains the construction industry due to the rapid increase in costs and elevated borrowing costs.

Euro Area: The region’s producer inflation in February 2024 saw a monthly decline of 1.0%, more than the consensus of 0.7% m/m contraction. On an annual basis, the reading decreased 8.3% y/y, thanks to the sharper drop in energy inflation and lower intermediate goods. Taken together with the recent more tepid-than-expected consumer inflation, it puts less pressure on the ECB to maintain elevated interest rates at multi-year highs.

Fixed Income

Global bonds: During Europe’s session, the belly and back-end of the Bund curve extended their gains after the ECB’s meeting account for the March meeting showed that policymakers were already seeing a stronger case for an interest rate soon. Then, the US Treasuries followed the gains late in the US session on the safe haven bid due to concerns for heightened geopolitical tension in the Middle East, which spilt over to other countries. This is despite the hawkish sounded Fed speaks by Richmond Fed Thomas Barkin (voter) saying that it would be “smart” for the central bank to take time to gain more clarity on the inflation path ahead, followed by Minneapolis Fed Kashkari statement, which entertained the idea of no rate cuts this year.

MYR Government Bonds: The local government bond market recovered yesterday following selected UST yields retraced from the prior session’s high, taking comfort from Jerome Powell’s assurance that the central bank will likely be appropriate to begin lowering borrowing costs at some point this year, although U.S. data remained hot. On the primary space, W.I. for GII 10/31 was last quoted at around 3.83%, unchanged from yesterday.

MYR Corporate Bonds: We noticed that flows in the PDS market were muted relative to the previous session but still decent at MYR557 million, with gainers outpacing losers. Among notable trades were MYR30 million on 03/52 Danainfra Nasional doneat 4.207%, MYR10 million on 05/24 TNB Northern Energy (AAA) done at MYR3.740%, and MYR20 million on 10/30 Alliance Bank done at 4.157%.

Forex

United States: The dollar fell alongside the overnight decline in UST yields and came as weekly jobless claims for the week ended 30 March rose by 9K to 221K versus estimates of about 214K. Comments from Fed officials, such as Minneapolis Fed President Neel Kashkari, that Fed cuts should be waited out in case these would slow the decline in inflation were taken in a positive light - suggesting stable reductions in rates may be palatable - pressured the dollar.

Europe: The euro was aided by the final Eurozone composite PMI reading for March, inching above 50 for the first time since May 2023, as the services PMI growth outweighed the decline in the manufacturing reading.

Asia-Pacific: The yen benefited from the weaker US dollar but remained near recent lows. Worries over the JPY trajectory remain, despite the recent hike in the interest rate, especially after the recent less dovish Fed officials’ comments. Still, Governor Kazuo Ueda said the BOJ could "respond with monetary policy" if FX moves to affect inflation and wages. The AUD benefited from the weaker USD. Chinese markets were closed for a holiday.

Malaysia: The ringgit was similarly aided by the lower dollar movement yesterday. The USD/MYR pair fell 0.3% to close at 4.740. We anticipate cautious Asian FX trading today ahead of the March US non-farm payrolls report, which will be released after hours.

Other Markets

Gold: Gold prices snapped its multiple days of bullish run as it fell 0.4% to USD2,291/oz as investors await more clarity for the rate cut outlook.

Crude oil: Brent surged 1.5% to close above USD90 per barrel for the first time since October as flared-up geopolitical tension continued to induce supply concerns.

Source: AmInvest Research - 5 Apr 2024