Snapshot Summary

Global FX: The dollar was firm before the US CPI release

Global Rates: Treasuries closed mixed within a tight range with the 10Y/2Y in a tight positive territory

MYR Bonds: GII 08/43 auction was relatively weak while overall market sentiment was guarded before US CPI and global bank rate decisions this month

USD/MYR: Ringgit succumbed to the dollar which pushed the USD/MYR pair back up to above 4.370

Macro News

Japan: The 2Q2024 GDP was revised lower to 2.9% q/q from +3.1% in the preliminary reading. Private consumption was at 0.8% non-annualised pace, down from the 0.9% preliminary number. The latest revision may pose an issue towards BoJ hike plans. However, the 2Q2024 GDP was still above BoJ's estimate of potential growth, which the central bank estimates at 0.6%.

China: China reported its August CPI at a slower pace of +0.6% y/y against consensus of +0.7% but was above the July pace of 0.5%. The August PPI was also released, where pace was a faster decline at -1.8% y/y against consensus of -1.5% and the July rate of -0.8%.

Fixed Income

Global Bonds: Treasuries closed mixed within a tight range. The 10Y/2Y remained in a tight positive territory. The sideways move comes before the eagerly awaited August US CPI data where consensus expectation is for a +0.2% m/m, similar pace as in July. Sentiment was also cautious ahead of this week's sale of the 3Y, 10Y and 30Y UST. Anticipated heavy issuances of corporate bonds also pressured the overall sentiment.

MYR Government Bonds: It was a quiet day in secondary trading of Malaysia's government bonds yesterday, amid similar sentiment in global markets before US CPI this week and FOMC and ECB meetings coming up. Meanwhile, focus was on the GII 08/43 auction. However, the sale received relatively weak demand at 1.921x BTC and 4.084% average yield for the MYR3.0 billion public tender (plus MYR2.0 billion private placement).

MYR Corporate Bonds: Trading in the onshore corporate bond market was also mixed, reflecting the general sentiment in the govvies market. Heavier flows were seen on higher grade papers, but their yield movement was sideways as select names realigned. Flows were especially heavy on AAA rated PASB, where PASB 01/30 led closed unchanged at 3.83% while slightly longer dated PASB 01/31 rose 1 bps to close at 3.86%. Meanwhile, Tenaga 08/33 (AAA) closed unchanged at 3.93%

Forex

United States: The dollar was firm on Monday as market participants readjusted their expectations of Fed rate cut for this year and caution ensued ahead of key inflation data later this week after labour market data last week did not resolve 25 bps or 50 bps cut debate. Although, we think the market would not be so sensitive towards the CPI data amid heavy pricing in unless the actual print comes in with a huge swings.

Europe: The euro and pound started the week cautiously amidst the firm dollar. Both currencies closed 0.4% lower on the day. Traders are bracing for the ECB policy meeting decision on Thursday where consensus is looking for a further 25 bps rate cut after starting the rate easing cycle in June. The BoE will meet later on 19 September.

Asia Pacific: The USDJPY pair bounced off the 142 level, in a sign that it needed solid evidence of Fed rate cut and BoJ rate hike for it to go lower. Yesterday's 2Q2024 GDP data confirmed that the economy grew faster than the previous quarter but was revised down compared to the preliminary reading, which can cast doubt over the BoJ rate hike plan. In China, the tepid inflation number suggests the local economy is facing the deflationary risks amidst a slump in private consumption. This could mean authorities have more work to do in propping the economy and market expectations are for the PBoC to further ease policy. As 25 bps upcoming rate cut has been fully priced in for the Fed, weakening drive for the yuan may come from its own economic struggles.

Malaysia: It was the same case for the ringgit, succumbing to the firm dollar which pushed the USDMYR pair back up to above 4.370. Cautious sentiment is expected to remain unless the US CPI data confirms the magnitude needed for the Fed to cut its rate.

Other Markets

Gold: Gold was traded higher as it went up by 0.4% to close at USD2,506/oz, recovering from prior day's losses despite the stronger dollar as markets are anticipating an imminent rate cut by the US Fed next week.

Crude oil: Crude oil rose on concerns for tight supply amidst worries that a hurricane is expected to hit Louisiana this week, helping to recover some losses from last week. Brent climbed 1.1% while WTI rose 1.5%.

Source: AmInvest Research - 10 Sep 2024