Snapshot Summary…

Global FX: The dollar edged higher amidst a lack of data flow

Global Rates: UST traders stood still while they awaited more scheduled speeches from the Fed

MYR Bonds: The local government bond space was muted ahead of the reopening of the 15 GII whilst the 10Y UST was in range.

USD/MYR: Ringgit rallied for the third day with a wider trading range

Macro News

China: PBoC maintained key lending rates in May, keeping the 1-year loan prime rate at 3.45% and the 5-year rate at 3.95%, both at record lows. This decision aligns with efforts to support economic recovery amidst mixed April data, including steady industrial output, a low jobless rate and sluggish retail turnover. PBoC sustained medium-term lending rates and implemented measures to stimulate the property sector.

Malaysia: Malaysia’s trade maintained its robust growth trend, inclining by 12.1% to RM221.74 billion which marks the fourth consecutive month of y/y expansion. Export recovery, driven by increased shipments of machinery, palm oil-based agriculture products, chemicals and steel iron products surged by 9.1% to MYR114.72 billion. Imports improved by 15.6.

Fixed Income

Global bonds: The US Treasuries market was dealt in a narrow range as it opened for the week. There was little in terms of fresh drivers on Monday amid no release of pertinent economic data. Meanwhile, UST traders also stood still as they awaited more scheduled speeches from Fed officials this week, as well as the release of the recent FOMC meeting minutes later in the week. Meanwhile, there was a slight weakening in Bunds. ECB policymaker Kazaks said that the central bank must be cautious in cutting rates though cuts are likely to begin in June.

MYR Government Bonds: The local government bond space was muted ahead of the reopening auction of the 15Y GII today while the 10Y UST stood above 4.400% ahead of several Fed members to speak. Meanwhile, we saw some profit-taking activities in the local bond market following a decent rally for the past two weeks while some players were seen to turn cautious as the 10Y UST has reversed by about 12bps from its 7-week low last Friday.

MYR Corporate Bonds: There was light trading interest in the corporate bond market yesterday amid the lack of net buying interest in the government bonds space as well as a lack of interest before the midweek public holiday. Only a limited number of names appeared in secondary trading. The more notable trades involved 03/28 Mercedes (AAA) at 3.95% (+7 bps) and 12/29 MBSB (A3) at 4.29% (+10 bps).

Forex

United States: The dollar edged higher on Monday and traded within a tight range amidst a lack of data flow for the day and cautious speeches by US Fed officials. Atlanta Fed Raphael Bostic said it will take a while for the Fed to be confident that inflation is on track to 2.0%. Fed Vice Chair Philip Jefferson said it is “too early to tell” whether the recent disinflationary sign is sustainable. The dollar also found some support from safe-haven demand after news flow showed the passing away of the Iranian President, which could spur more geopolitical tension.

Europe: The EUR fell 0.1% but is still not far off from the more than one-month high it reached last week. The GBP held steady at 1.271 after BoE Deputy Governor Ben Broadbent noted that the central bank could cut interest rates this summer depending on how the wage growth and inflation eases.

Asia-Pacific: The Chinese yuan eased to 7.235 despite the PBoC setting its daily yuan fixing 3 pips firmer than the previous fix of 7.1045. Investors also digested the government’s announcement of measures to prop up the property sector which includes the PBoC facilitating USD138.3 billion in funding. On another note, the central bank kept both the one-year and five-year loan prime rates unchanged at 3.45% and 3.95%, each. The Japanese yen weakened again for the third day as the JGB 10Y yield climbed to an 11-year high on Monday at 0.90%, prompted by investors’ expectations that BoJ will take further steps to tighten its policy in the coming months.

Malaysia: The ringgit held steady around 4.686 after it was traded within the range of 4.683 – 4.688. The ringgit is now at its strongest level since March, amidst the prospect of easing US inflation and the federal funds rate will not be raised again. Monday’s external trade data fell short of market expectations, suggesting global trade remains under pressure and may take a while before fully recovering.

Other Markets

Gold: The gold prices ran up to their new high, gaining 0.4% to USD2,425/oz amidst the geopolitical risks in the Middle East remained high.

Crude oil: Oil prices eased with Brent and WTI shedding 0.3% on cautious Fed speeches.

Source: AmInvest Research - 21 May 2024