AmInvest Research Reports

Fixed Income & FX Research - 12 Apr 2024

AmInvest
Publish date: Fri, 12 Apr 2024, 10:44 AM
AmInvest
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Snapshot Summary…

Global FX: USD rose to a 4-month high while sentiment was aided by the release of firm inflation numbers

Global Rates: Treasuries closed within a narrow range on Thursday, as sentiment cooled down after prior couple of days large losses

MYR Bonds: Benchmark MGS and GII papers were mainly stronger on Tuesday, but this was before the print of this week’s US inflation data

USD/MYR: Before the midweek holiday, the ringgit was mostly firm below the 4.750 level

Macro News

US: The US headline PPI for March was a cooler-than-expected rate of 0.2%; (consensus 0.3%) and core PPI of 0.2% (consensus 0.3%). However, the year-on- year headline PPI quickened to 2.1% from 1.6% in February while core PPI rose to 2.4% from 2.1%.US: US CPI was up 0.4% m/m in March (consensus 0.3%) while core CPI, which excludes food and energy, also rose 0.4% m/m (consensus 0.3%). On a year-on-year basis, the CPI increased by 3.5%, y/y or higher versus 3.2% in February, while core CPI was up 3.8% for the second month.

Europe: The ECB held its interest rate for the fifth consecutive time, but signalled confidence that inflation would return to target, and that it could soon ease its stance. “In June, we know that we will get a lot more data,” ECB president Christine Lagarde said at a news conference. The ECB main refinancing rate remained unchanged at 4.50%.

Fixed Income

Global bonds: Treasuries closed within a narrow range on Thursday, as sentiment cooled down after prior couple of days large losses on the back of strong US CPI release. On Thursday, there was support below the 4.60% level as the PPI report for March was at 0.2% m/ m (consensus 0.3%) and core PPI at 0.2% (consensus 0.3%).

MYR Government Bonds: Benchmark MGS and GII papers were mainly stronger, while traded volume was decent a day before the mid-week public holiday. Sentiment was supported by UST trading (when the 10Y was near 4.40%) but this was before the print of this week’s US inflation data.

MYR Corporate Bonds: There was a lack of trading interest in the corporate bond market on Tuesday ahead of the midweek Eid holiday. The bulk of the flows were concentrated on limited names only whilst yields moved mixed. Heavier flows were seen on papers such as 06/27 Johor Corp (AAA) at 4.00% (unch) and 04/26 UEM Edgenta (AA-) at 3.92% (+1 bp).

Forex

United States: The dollar rose to a 4-month high as bond yield rose while sentiment was aided by the release of firm inflation numbers. Also, weekly initial unemployment claims fell to a 5-week low. In addition, hawkish Fed comments boosted the dollar. New York Fed President Williams said though there is "tremendous progress" toward lowering inflation vis-a-vis employment, there is little need to cut interest rates in the "very near term."

Europe: On Thursday, the EUR slipped by 0.2% to settle at 1.073 whilst the USD maintained levels near 105.3. A dovish ECB at its policy meeting also played on the EUR. The ECB held its policy rate unchanged but signalled that a move to an easier monetary stance may be near. GBP was firmer by +0.1% on hints of a pickup after in the past week it had fallen to its lowest since December.

Asia-Pacific: The yuan fell against the dollar post release of the stronger than expected US CPI and core CPI. This was despite signal from PBoC which set out a firm CNY fixing before the market open, seen at 7.0968, stronger than Reuter’s estimate by a large 1,654 pips. On the other hand, post release of the US PPI, the USD/JPY was seen testing lower towards 153. JPY was also aided by ongoing speculation that the BoJ may step in to alleviate excessive JPY weakness.

Malaysia: Before the midweek holiday, the ringgit was mostly firm near the 4.7455/7500 level though this was before the strong US CPI release. Levels are now above 4.770 and we are cautious on MYR trading amid the firm USD for today.

Other Markets

Gold: Gold prices strengthened further by 1.6% to USD2,373/oz, after recent reports of central bank buying to shore up reserves, and as traders piled up the metal due to safe haven demand amid geopolitical risks.

Crude oil: Prices fell, tumbling about 1.4% for the WTI. Reaction from possible delay in Fed rate cuts pressured the demand outlook. Aside, the EIA reported US crude inventories rose by 5.841 million barrels last week – the largest in about two months.

Source: AmInvest Research - 12 Apr 2024

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