Snapshot Summary…

Global FX: The dollar snapped a two day rally to track the fall in UST yields

Global Rates: US Treasuries were propelled by dovish remarks by Fed officials

MYR Bonds: Another calm day in the MGS market with modest trading concentrated on the belly part of the curve

USD/MYR: The ringgit was pressured but ended the day little changed compared with the prior day

Macro News

Germany: Sentiment among German companies has declined, as evidenced by a drop in the ifo Business Climate Index from 89.3 in May to 88.6 in June, driven by more pessimistic expectations while assessments of the current situation remained stable. Markets were looking for the reading to slightly improve to 89.7.. In the manufacturing sector, the business climate index fell after three consecutive months of rises, with companies expressing increased scepticism about the future due to a declining order backlog, although current business satisfaction improved slightly.Singapore: Singapore’s annual inflation rate rose to 3.1% y/y in May 2024, from 2.7 in April and surpassing market expectations of 3.0%. The increase was driven by the prices for recreation and culture at 5.0%, followed by healthcare at 4.8%. The annual core inflation was 0% m/m, while the headline number rose by 0.7% m/m.

Fixed Income

Global bonds: Bunds yields shifted higher amidst a relatively quiet day in the European markets and investors looked past the worse reading in the Ifo Business Climate Indicator. But the movement did not spill into the UST market, which posted decent, gains propelled by dovish remarks by Fed officials. Chicago Fed President Austan Goolsbee said in an interview that the recent signs of cooling consumer spending could lay the path for rate cuts. Separately, San Francisco President Mary Daly said that the Fed has to remain “open and vigilant” in navigating the risks of still high inflation and rising unemployment.

MYR Government Bonds: Another calm day in the domestic govvies market, to follow consolidation in the UST market throughout the Asian trading session. Modest two way trading was seen concentrated on the 3Y up to the 15Y part of the curve where buyers focused on relative value kinks in the curve

MYR Corporate Bonds: The ringgit corporate bond market recorded a slight net buying bias yesterday. We think investors remain interested in yield pickup and were yesterday seen going for select AA and A rated names on modest volumes. However, leading the flows also include AAA PSEP 03/31 which fell 3 bps to close at 3.92% on MYR60 million volume. In the AA segment, flows were led by AA1 Sabah Dev Bank 06/25 which edged down 1 bps to close at 4.08%. We also saw Sabah Dev Bank 08/25 which rose 1 bps to close at 4.12%.

Forex

United States: The US dollar fell 0.3% to 105.47, falling from its nearly two-month peak . The dollar's snapped a two day rally to track the fall in UST yields on the back of Fed officials’ dovish comments. On the political front, there will be debate between US Presidential candidates President Joe Biden and former President Donald Trump later on Thursday after the US markets close.

Europe: The common currency euro took advantage from the lower dollar and rose 0.4%. Nonetheless, we continue to expect traders to cautiously trade the euro ahead of the first round of voting in the French election on Sunday, after French President Emmanuel Macron called a snap election for the lower parliament. Similarly, the GBP also went up on Monday but sentiment tilts towards the cautious side ahead of the UK election on 4 July.

Asia-Pacific: Currencies in the region were mixed as we suspect some currencies fell against the dollar as a reaction from the stronger US PMI data last Friday. The JPY managed to firm up on the day amidst rising expectation of intervention by Japan authorities as the JPY recently crept up towards the 160 per dollar level. The yen also found some support as the summary of opinions at the BoJ’s June policy suggests some officials were in favour to raise interest rates to prevent the risk of inflation overshooting. Meanwhile, the PBoC set the USD/CNY midpoint rate at 7.1201 which is the weakest level since November, and the central bank gradually lowering its fixing in recent sessions suggest it is allowing some weakness to the currency amid the strong US dollar.

Malaysia: The ringgit was pressured but ended the day at 4.713, as traders kept a cautious tone to the currency against the strong dollar especially after the firm US macro data at end of last week. Malaysia’s June CPI is due today, so we expect some further cautious trading ahead of the release.

Other Markets

Gold: Gold price rose by 0.7% to close at USD2,335 per oz. The price was generally supported by the weaker dollar performance overnight.

Crude oil: Oil rallied overnight; WTI up by 3.1% and Brent by 2.1%. The commodity was aided by outlook for strong demand in the coming summer travel season as well as geopolitical risks including reported drone attacks on refineries in Russia.

Source: AmInvest Research - 25 Jun 2024