Snapshot Summary…

Global FX: Dollar fell after disappointing US 1Q2024 GDP advance estimate data

Global Rates: US Treasuries closed weaker again overnight as 10Y yield reached a fresh YTD high

MYR Bonds: The onshore government bond market saw another round of sell-off yesterday, with yields higher across the curve

USD/MYR: Ringgit firmed and remained traded below the 4.790 level

Macro News

United States: The US released macro indicators suggesting weaker economic growth activity but with firm price inflation. The advance 1Q2024 GDP showed a smaller increase at a seasonally adjusted annual rate of 1.6% (consensus 2.4%) against 3.4% in 4Q2023 because personal consumption expenditure growth at 2.5% was weaker than expected. On the other hand, the GDP Price Deflator accelerated to 3.1% from 1.6% in 4Q2023.

Malaysia: Malaysia’s headline inflation rate remained flat at 1.8% y/y in March 2024 versus the previous month. The smaller-than-expected inflation print was supported by Housing, Water, Electricity, Gas & Other Fuels (3.0%), Restaurant & Accommodation Services (3.0%), and Personal Care, Social Protection & Miscellaneous Goods & Services (2.6%). The growth also translated into a monthly increase of a marginal 0.1% m/m vs the prior 0.5% m/m. Meanwhile, core inflation grew slower at 1.7% y/y compared to 1.8% y/y for the previous month. We notice no impact of the 2% service tax hike on inflation because of the slew of exemptions, particularly in the logistics sector.

Fixed Income

Global bonds: US Treasuries closed weaker again overnight as the 10Y yield reached a fresh YTD high of 4.70% in response to the economic data release. Overnight saw 1Q2024 headline GDP at 1.6% (consensus 2.4%; prior 3.4%), but the market focused on the GDP Price Deflator rising to 3.1% from 1.6% in 4Q1023 and Core PCE Price at 3.7% or rising from 2.0% prior quarter. The UST market was further pressured by the USD7.0 billion sale of the 7Y UST, which saw lower demand at 2.48x BTC versus the 2.57x average at the previous 12 auctions of the same tenor.

MYR Government Bonds: The onshore government bond market saw another round of sell-off yesterday, with yields higher across the curve as the fear that the US will keep rates higher for longer continues to affect sentiment. Meanwhile, the reopening of MGS 09/26 was weak and garnered only 1.746x BTC, while the sell-off carried on post-auction. We saw that GlI9/26 spiked about around 8ops daily while the bear- flattening condition may develop further amidst the backdrop of weak sentiment in the global bond space.

MYR Corporate Bonds: The onshore corporate bond market fell yesterday alongside the weak sentiment in the global bond market. The net selling action was particularlylarger on high-grade papers, whilst the MGS/GII segment fell at the same time. Notably, we saw 04/40 Danainfra (GG) up 10 bps to 4.13% and 08/42 Danainfra up 10 bps to close at 4.19%.

Forex

United States: The dollar slipped after US advance estimate 1Q2024 GDP data showed the economy grew slower than expected and, at the same time, downplayed hotter-than-expected inflation print as UST yields rose.

Europe: The EUR was up 0.3% against the lower dollar, partly supported by the uncertainties of the rate path after an expected June first rate cut by the ECB. The central bank’s Governing Council, Madis Muller, said he does not favour lowering interest rates for the second straight meeting. The GBP was also closed firmer by 0.4% after US consumer confidence gauged a slight improvement in April 2024.

Asia-Pacific: Asian currencies were mixed after most opened lower during the early Asian session as a reaction to the previous day's firm dollar. The JPY remained on a bearish trend and reached a new three-decade low again. Currency traders are on alert amidst fear of impending intervention by authorities and ahead of the BoJ policy meeting today. The CNY, meanwhile, snapped its multiple days of losing streak to close slightly firmer by 0.1% to 7.240.

Malaysia: The currency opened at 4.781 and reached as low as 4.786 per dollar before retracing some losses to end the day at 4.776, following DOSM releasing slightly underwhelming inflation data compared to the market forecast.

Other Markets

Gold: Gold prices gained after slower US GDP growth prompted safe-haven demand among market players. It rose 0.7% to USD2,332/oz.

Crude oil: Oil prices rose, with Brent surging 1.1% and WTI soaring 1.2% amidst the ongoing Middle East tension.

Source: AmInvest Research - 26 Apr 2024