Snapshot Summary…

Global FX: The USD resumed its bullish trend on hawkish Fed remarks

Global Rates: The UST curve limit its losses after 2Y note auction garnered decent demand

MYR Bonds: The local bond space continued to trade sideways with some profit taking activities

USD/MYR: The MYR was traded firmer and aided by the CPI release

Macro News

Malaysia: Malaysia’s annual inflation rate rose to 2.0% m/m in May 2024 more than market expectations of 1.9%. The increase was driven mostly by housing and health, at 3.2% m/m and 2.2% m/m respectively. Softer food inflation was recorded at 1.8% m/m compared to 2.0% in April 2024. The headline inflation for 2024 is expected to range between 2 and 3.5%, differing from the 2.5% recorded the previous year. Core consumer prices, which exclude volatile fresh food items and administered costs, grew by 1.9% y/y, maintaining the same pace as in April. The headline increased by 0.3% m/m, the highest in three months, following a 0.2% rise in April.

Australia: Westpac-Melbourne Institute Consumer Sentiment index dropped by 2.4% y/y in April 2024 due to persistent inflation and high interest rates. There are anticipations for the Reserve Bank of Australia to initiate rate cuts later this year, positive job market trends and escalating house prices have clouded the economic outlook.

Fixed Income

Global bonds: Bunds turned bearish during the late session and pared early gains after Canada’s inflation came in higher than expected at 2.9% y/y vs. consensus of 2.6% y/y. The turnaround later translated into bearish tone in the UST market, coupled with hawkish statements from Fed Governor Michelle Bowman, saying she sees several upside risks to the inflation outlook. However, losses were limited following the decent 2Y UST auction worth USD69 billion with yield awarded at 4.706%, matching the pre-auction trading yield. The 10Y yield rose 1.5 bps to 4.248% but we also noted the 5Y yield jumped 2.1 bps to 4.276%.

MYR Government Bonds: The local bond space continued to trade sideways with some profit taking activities amid the local CPI print was slightly hotter than the estimates (act:2% vs est:1.9%) while core inflation growth remained unchanged as per previous month. Post CPI release, we did not see any knee-jerk effect in the local bond market as two-way trading remained healthy with some players remained cautiously upbeat in their hunt for yield pick-up.

MYR Corporate Bonds: Flows in the corporate space were heavy at MYR987 million, led by buying interests in double-A rated papers, followed with AAA and GGs. Among notable trades were MYR10 million Danainfra 11/29 done at 3.697%, MYR30 million on PLUS 01/38 (AAA) done at 4.080%, and MYR75 million on YTL Corporation 09/35 (AA1) done at 4.197%.

Forex

United States: The dollar index rose 0.1% to 105.61, propelled by the slightly better- than-anticipated US June Conference Board consumer confidence index coming in line at 100.4. The US dollar continued to strengthen following hawkish remarks from the Fed official Bowman indicating a cautious approach towards rate cuts.

Europe: The euro and pound were down overnight as the dollar maintained strength. The dollar was also deemed a safer haven against Europe’s currencies in the midst of political risks ahead of the elections in France and the UK.

Asia-Pacific: There was little in terms of very positive push for Asian currencies yesterday amid the firm dollar and while the PBoC again setting a weak fixing for USD/CNY. The PBOC set the midpoint rate at 7.1225 versus the dollar, and the fix was also its weakest level since November. Nevertheless, the fix was 1,362 pips firmer than Reuters’ expectations.

Malaysia: The US Treasury maintained Malaysia on its FX manipulation list. The US indicated Malaysian will remain on the list until “it meets fewer than two criteria for two reports in a row”, one of which is Malaysia’s trade surplus with the US needs to substantially fall. As for the FX trading yesterday, the MYR was firmer and aided by the CPI release.

Other Markets

Gold: Gold price fell 0.6% to USD2,320/oz as markets await for more inflation data this week.

Crude oil: Oil was bearish as the dollar strengthened and industry report showed unexpected gains in US crude oil inventories. Brent fell 1.2% to USD85 per barrel while WTI shed 0.9% to USD82 per barrel.

Source: AmInvest Research - 26 Jun 2024