Snapshot Summary…

Global FX: The dollar found support from Fed officials’ comments as well as safe haven demand due to the Middle East tensions

Global Rates: The UST market continued to consolidate and overnight saw some reaction from Eurozone and China services PMI numbers

MYR Bonds: Benchmark bonds rallied as sentiment remained driven by the decline in UST yields

USD/MYR: The MYR was dealt weaker against the USD and along the crosses vis-a- vis regional currencies yesterday

Macro News

Eurozone: The Eurozone's April Services PMI index rose to 53.3 (consensus 52.9; March 51.5). Of the countries, Germany's April Services PMI rose to 53.2 (consensus 53.3; last 50.1), and France's April Services PMI rose to 51.3 (consensus 50.5; last 48.3). However, Italy's PMI fell to 54.3 (consensus 54.7; last 54.6).

Eurozone: The Eurozone PPI came in at -0.4% m/m in March, which came in line with expectations but is a smaller contraction than in the prior month (-1.1%). On a y/y basis, the Eurozone PPI fell by a smaller 7.8% compared with the preceding month’s -8.5% y/y. In contrast, the March CPI was more stable, up 0.8% m/m (in line with consensus) versus a similar 0.8% in February. The March CPI was +2.4% y/y (in line with consensus) but lower than February at +2.6% y/y pace.

Indonesia: Indonesia's economy surpassed expectations in the year's first quarter, primarily due to increased public spending. It expanded by 5.11% y/y from January to March, outperforming economists' forecasts of 5.0% and marking its strongest growth in three quarters. This growth was attributed to heightened campaign expenditures for the February elections and elevated household spending during Ramadan in March. These factors helped offset the adverse effects of dwindling commodity exports over the past year.

Fixed Income

Global bonds: The UST market closed mixed with yields on the front end up 1 bps and the bellies and far end of the curve about 1-2 bps lower. There was some negative influence from expanding services PMI readings out of China, Germany, France, Italy, and Spain. There was no release of pertinent US data to drive sentiment. The UST market also faces 3Y and 10Y notes and 30Y bond auctions. China's April Caixin Services PMI hit 52.5, within expectations and versus 52.7 in the month before.

MYR Government Bonds: On Monday, Malaysian government bonds posted gains with yields lower by 1-4 bps along the benchmark papers. Sentiment remained driven by the decline in UST yields over the past few days. However, overall gains were limited on the MGS front amid holidays in Japan and the UK yesterday. We do not think bond sentiment would change amid BNM holding the OPR at 3.00% for now.

MYR Corporate Bonds: Corporate bonds closed mixed yesterday. Flows were led by names such as UDA (AA-), where on 04/26, UDA IMTN reemerged at 4.49% (-2 bps) after being absent from secondary trading since March. Also, on 05/28, UDA IMTN fell 23 bps to close at 4.68%. Meanwhile, there were pickups along GG Danainfra's longer- dated tranches. 02/33 Danainfra (GG) fell 5 bps to 3.95%, while 09/35 Danainfra (+4 bps) and 11/35 Danainfra ( -14 bps) realigned at 4.00%.

Forex

United States: The dollar closed in range and supported just above the 105 level. The greenback, which sustained levels after last week's FOMC and NFP release, found support from Fed officials’ comments and safe-haven demand due to the Middle East tensions. It was reported that Hamas reiterated its demand for an end to the war in exchange for the freeing of hostages, which Israel rejected. Meanwhile, Israel was set to initiate attacks on Rafah. As for Fed-speak, NY Fed’s Williams (FOMC voter) and Richmond Fed’s Barkin (FOMC voter) signalled that inflation remains a worry.

Europe: The EUR posted gains were aided by last week’s US jobs data, while strong Eurozone services PMI added the pickup in the currency. Eurozone's April Services PMI hit rose to 53.3 from 51.5 in March (consensus 52.9). Eurozone PPI fell by 0.4% m/m, which met expectations but a smaller decline versus -1.1% the month before. On a y/y basis, the PPI fell 7.8% (March -8.5%). Meanwhile, the GBP was in range ahead of the BoE policy meeting scheduled for 9 May, where the consensus expectation is for the central bank to hold the interest rate steady.

Asia-Pacific: The USD found support just above the 105 level during yesterday's Asian session, which pressured the CNY after it rallied last week post-FOMC. The weaker CNY yesterday was despite the PBoC setting its midpoint for the CNY at a firm 7.0994 or about 69 pips stronger than its previous fixing. Meanwhile, CNY was aided little by mixed data. The Caixin Composite PMI for April 2024 rose to 52.8 from 52.7 previously. The Caixin China General Services PMI edged down to 52.5 in April from 52.7 previously. Elsewhere, the JPY also ticked lower amid the USD support. Meanwhile, the AUD was dealt with slightly more strongly, and support was found ahead of the RBA meeting today.

Malaysia: The MYR was dealt weaker against the USD and along the crosses vis-a- vis regional currencies yesterday. As the rate and yield gaps remain the key issues plaguing the ringgit, we see little support to move the dial on the local note.

Other Markets

Gold: Gold rose 1.0%. A pickup in gold arose from safe-haven demand amid the Middle East worries. There was also demand for gold, given projected Fed rate cuts later this year, as cash returns are likely to decline as rate cuts come into play.

Crude oil: Oil prices also rose. Brent was 0.4% higher yesterday, aided by fresh worries about the Middle East crisis.

Source: AmInvest Research - 7 May 2024