Snapshot Summary…

Global FX: The dollar climbs in tandem with rise in UST yields

Global Rates: The UST market closed weaker after hawkish comments on “higher- for-longer” narrative

MYR Bonds: Yesterday session saw the govvies market closing flat due to lack of data catalysts

USD/MYR: The MYR posted marginal gains amid mixed to lower Asian currencies

Macro News

United States: The Commerce Department’s Census Bureau released a report yesterday showing US wholesale inventories dropped 0.4% m/m in March, down from 0.2% m/m growth in the prior month but in line with market forecast. This translates to 2.3% y/y fall. Current number is seen approaching the lows seen when pandemic first hit the economy during 2020 and away from post-pandemic highs of around 2.0% m/m.

Germany: Germany's industrial production fell by less than expected in March but continues a straight 10 months of declines. On y/y basis, Germany reported industrial production fell by 3.3% against -3.6% y/y consensus and also a slower contraction than -5.3% y/y in February. On m/m basis, industrial production fell 0.4% versus consensus of -0.7%, and returning to contraction after an increase of 1.7% m/m in February. There were signs of expansion in Germany's economy, based on indicators such as the April services PMI being strong as per release last week (53.2 index reading), and construction portion of the industrial production index up by 1.0% m/m, but sluggish industrial production poses relevant risk to Germany's growth this year. Late April release showed Germany's economy contracting by 0.9% y/y in its preliminary reading for 1Q2024.

Fixed Income

Global bonds: Another day lacking in fresh economic data releases saw bond closing within a narrow range from the day before. Only fresh driver for bonds was more hawkish comments from the Fed. Overnight saw Boston Fed President Collins saying that interest rates need to stay higher for longer in order to press down on inflation. At the close we noted the 10Y UST was at 4.49%, or 4 bps higher than the day before.

MYR Government Bonds: Ahead of today’s MPC meeting, yesterday session saw the govvies market closing flat due to lack of data catalysts though we saw some profit- taking activities after Fed member Neel Kashkari said that rates are likely to stay at the present level for an extended period.

MYR Corporate Bonds: Ringgit corporate bonds closed mixed again yesterday. There was maybe some cautious mood amongst PDS investors amid sideways MGS movements and global markets finding some fresh pressure from hawkish Fedspeak this week. We noted some trading on power bonds yesterday though yields weremixed. These include 01/37 Edra (AA3) at 4.34% (+1 bps) and 12/25 Jimah (AA-) at 4.05% (-20 bps).

Forex

United States: Hawkish comments by Boston Fed President Susan Collins helped support the dollar staying above 150-level as the narrative “higher-for-longer” was in focus in the market. The dollar climbed in tandem with the rising UST yields.

Europe: The EUR was pressured by the firm dollar, but partial support was seen coming from ECB Governing Council Pierre Wunsch who expressed a cautious tone, saying there’s elevated risks on consumer inflation if monetary policy diverge too much from that of the US Fed. The GBP also closed Wednesday weaker and continue trading lower during early Tokyo session this morning ahead of BoE meeting later today, where the market is expecting the central bank to start signal when it will cut its interest rate.

Asia-Pacific: The CNY was traded weaker versus the USD yesterday amid a firm USD and weaker midpoint fixing by the PBoC. China’s central bank was reported to have set the fixing at 7.1016 prior to the market open, compared with the previous level of 7.1002. Meanwhile, disrupted by a recovering USD after last week’s decline, and amid prevailing concerns that BoJ is not yet keen to lift interest rates but would rather intervene directly in the market to prop the JPY, the USD/JPY rose yesterday to close at 155.53 compared with 154.69 the day before. Aside, the AUD fell for a second day, continued to be driven down after this week’s less hawkish RBA bias.

Malaysia: The USD/MYR closed at its one-week high of 4.7415 after trading within the tight range of 4.741 and 4.748 as the dollar strength persists and as investors await for BNM MPC meeting later today.

Other Markets

Gold: Gold fell as the dollar strengthened and US yields climbed. The precious metal price fell 0.2% to finish at USD2,309/oz.

Crude oil: Data showed that US crude oil stockpiles dropped 1.36 million barrels last week, signalling tight physical market. This prompted Brent to gain 0.5% to USD84 per barrel while WTI to climb 0.8% to USD79 per barrel.

Source: AmInvest Research - 9 May 2024