Snapshot Summary…

Global FX: Dollar rallied after US inflation data suggests still stubborn price pressures

Global Rates: The US Treasuries market posted modest gains on Friday, thus paring the losses for the week

MYR Bonds: The onshore PDS market traded weaker, in tandem with weak sovereign bond space

USD/MYR: The Ringgit firmed further on Friday, but a cautious tone is imminent today

Macro News

United States: The core Personal Consumption Expenditures (PCE) price index — closely monitored by the Federal Reserve — rose by 2.8% y/y, aligning with February's figures but slightly exceeding forecasts (2.6 % y/y). Including volatile items like food and energy, the overall PCE index also showed a year-over-year increase of 2.7% y/y, surpassing expectations (2.6% y/y). On a monthly basis, both core and overall indices advanced by 0.3%, consistent with prior months. Despite ongoing high inflation, consumer spending remained robust, rising 0.8% over the month, and personal incomes also saw a moderate increase. However, the personal saving rate declined, indicating that households are dipping into savings to maintain spending levels.Japan: On Friday, the Bank of Japan (BOJ) maintained its benchmark short-term interest rate at -0.1%, consistent with expectations, following its inaugural rate hike in 17 years during the previous session. Additionally, the central bank adjusted its economic projections, anticipating softer economic growth but higher inflation shortly due to increased import costs and reduced government relief measures. The BOJ now forecasts that consumer price index (CPI) inflation will range between 2.6% and 3% for fiscal 2024, an upward revision from its January prediction of 2.2% to 2.5%. The bank expects inflation to stabilise around its 2% target in 2025 and 2026.

Fixed Income

Global bonds: The US Treasuries market posted modest gains on Friday, thus paring the week's losses. Treasury yields ended 3-4 bps lower along the medium and far end of the curve and the market reacted to mostly in line US personal income and spending numbers. As expected, personal income rose 0.5% m/m in March, while personal spending at a larger-than-expected +0.8% (consensus 0.6%) pressured bonds and remained pressured as the PCE Price Index and the core Index rose 0.3% m/m, as expected.

MYR Government Bonds: The onshore government market remained weak after the UST spiked to nearly 10 bps the day before amid firm US data. Meanwhile, the market was waiting for the Fed’s favourite inflation gauge, i.e., the US PCE deflator. With PCE data coming in line on a m/m basis and UST paring weekly losses last Friday, we could expect some onshore demand for MGS to start the week. However, this week may also be event- and data-heavy and could limit yield movements, including US ISM data, FOMC meetings, and April non-farm payrolls.

MYR Corporate Bonds: Corporate bonds were traded on a weaker footing last Friday, reflecting the weak sentiment in global bond markets and the low support received from current MGS trading. However, amidst the net selling pressure, we did not notice much regarding higher-grade AAA-rated net selling flows, which could suggest high- grade interest on PDS should remain relatively healthy in the short term. Notable trades seen last Friday include 10/39 Danainfra (GG) rising a small half bps to close at 4.20% and 10/39 Prasarana (GG) rose 1 bps to close at 4.20% as well - i.e., both papers consolidating their levels.

Forex

United States: The dollar continued to be supported by Friday’s boost from data, specifically US March consumer spending and Fed preferred inflation measures PCE Price Index. This week will be a heavy one, as will the global market.

Europe: The EUR fell 0.3% to close at 1.069, which translated to 0.4% gains on the week, its largest weekly rise since early March. The GBP closed in the red with 0.2% losses on the day. Data-wise, it was somewhat mixed with Eurozone consumer inflation expectation for the next 12 months, which improved to 3.0% in March 2024 from 3.1% in the prior month, while consumer confidence in the UK saw slight improvements.

Asia-Pacific: The yen hit a fresh 34-year low as the BoJ decided to maintain an easy monetary policy and held its interest rate unchanged. Nevertheless, the central bank also signalled possible rate hikes as we advance if the underlying inflation rate rises and fluctuations in the currency affect underlying inflation. In data release, the April Tokyo CPI rose 1.8% y/y (consensus 2.6%; last 2.6%), and Core CPI rose 1.6% y/y (consensus 2.2%; last 2.4%). Meanwhile, the yuan received support from firm daily fixings (7.056 on Friday) and intervention by state-owned banks but remained pressured by the strong dollar and some caution before China's PMI data release this week.

Malaysia: The Ringgit firmed further to 4.768 as the ringgit continues to undergo corrections after a recent multi-year high. However, we are cautious about the ringgit’s volatility today as a reaction to the surge in the dollar last Friday.

Other Markets

Gold: Gold prices fell, rose 0.2% to USD2,338/oz, and remained near the record high it reached in April as the UST yields went down.

Crude oil: Oil prices closed mixed with WTI sinking 1.5% while Brent rose 0.6% as investors weighed the ongoing Middle-East tension against the latest US inflation data.

Source: AmInvest Research - 29 Apr 2024