Snapshot Summary…

Global FX: Dollar hits an intraday high on lower US jobless claims before retracing some of the gains

Global Rates: UST yields rose as US labour market data eased down the recessionary fears

MYR Bonds: Local govvies saw a slight recovery after two days of weakness but corporate space saw light interests

USD/MYR: The USD/MYR trimmed some of its prior session’s gains to finish Thursday further below the 4.50 level

Macro News

Malaysia: Private consumption remains robust. Retail sales in Malaysia increased by 7.9% y/y in June 2024, marking a deceleration from the 8.7% growth seen in the previous month. Sales in general merchandise stores saw a growth of 8.8% y/y, down from 10.7% in May, while sales for household equipment in specialised stores grew by 7.3% y/y, a decrease from the 12.8% growth in the previous month. Conversely, sales of other goods in specialised stores surged by 12.6% y/y, up from 5.3% previously. Sales of motor vehicles only increased by 2% y/y compared to 10.5% in the prior month. Monthly retail sales in June showed a modest increase of 0.2% m/m, following a 0.3% rise in May. Such a solid performance enforces the strong 2Q2024 GDP, slated to be unveiled next week.

United States: The number of individuals claiming unemployment benefits in the United States decreased by 17,000 to 230,000 for the period ending on August 3rd, which was below market expectations of 240,000. Despite this decrease, the number of claims remains significantly higher than the average for this year, indicating a softening in the US labour market since its peak after the pandemic. However, it is still historically considered tight.

Fixed Income

Global bonds: UST market yields rose overnight. Lift to the yields included less in the weekly jobless claims data, while sentiment was guarded as the Treasury Department sold 30Y bonds despite the steady demand. The Treasury Department sold USD25 billion of the bonds at a high yield of 4.314%, or where news reports suggested a tail of 2 bps, and where bids were 2.31 times the amount of paper on offer.

MYR Government Bonds: The MGS market recovered slightly after two days of weakness. MGS yields fell on shorter to bellies of the curve while IRS levels also fell, seen about 4 bps. The front to middle part of the curve rally coincided with the strong ringgit performance. Boost to MGS trading also owed to support seen in UST levels during the Asian hours with the 10Y below the 4.00% mark.

MYR Corporate Bonds: Corporate bonds saw light interest yesterday as sentiment was affected by the past few days’ MGS losses. The traded papers yesterday include names commonly less seen in secondary trading. Notable trades include AA2-ratedImtiaz, where its 10/28 tranche was dealt 2 bps down to 3.85%, and its 05/29 fell 11 bps to 3.88%.

Forex

United States: The dollar briefly touched an intraday high of 103.55 yesterday after the initial jobless claims went lower than the market expected. But market betting the Fed is already behind the curve to cut its interest rate pulled the dollar back down to close around 103.2, almost the same as the prior session's closing price. Hawkish remarks by Kansas Fed President Jeffrey Schmid, signalling he is not ready to support lowering the interest rates for now, may have provided some support for the dollar.

Europe: Lack of data in the region meant the EUR was driven mainly by the movement of the USD. On the other hand, the GBP went up 0.4% on the day amidst risk-on mode. The safe-haven Swiss franc went down by 0.6% d/d.

Asia Pacific: We noticed that the safe-haven JPY continued to weaken on Thursday, alongside the lower Swiss Franc, as the market pared its recessionary fears. A summary of opinions from the Bank of Japan’s 31st July meeting showed that policymakers are still expecting policies to remain accommodative, and the recent hike is more on adjusting the “degree of monetary accommodation” given the current underlying inflation. The CNY was flat in China at 7.176 after the PBoC set its mid- point daily fixing rate at 7.1460, the weakest level since November. Meanwhile, the Aussie dollar surged 1.1% on the persistently hawkish RBA following its governor Michele Bullock stating that the central bank will not hesitate to raise interest rates if needed.

Malaysia: The USD/MYR trimmed some of its prior session’s gains, dropping 0.6% on the day to finish below the 4.50 level. The ringgit performance was in tandem with other Asian currencies, taking advantage of the risk-on environment. Meanwhile, Malaysia’ saw slower growth in June retail sales but remained near the 16-month peak it reached in May.

Other Markets

Gold: Gold rebounded, snapping its five-day bearish run despite the stable dollar and higher UST yields.

Crude oil: Oil continued its recovery from a sharp decline, with traders remain closely attentive to movements in the global market and geopolitical tensions in the Middle East.

Source: AmInvest Research - 9 Aug 2024