Snapshot Summary

Global FX: The dollar was in range as markets consolidated post-FOMC

Global Rates: Yields in US Treasuries ticked higher on profit-taking

MYR Bonds: Malaysia's government bonds closed flat as net buying interest amid the strong ringgit was outweighed by profit-taking pressure

USD/MYR: The ringgit strengthened again and marked the fourth straight day of a bullish run

Macro News

Japan: BoJ maintained its interest rate at 0.25%. During his press conference, Governor Kazuo Ueda sent less than hawkish remarks, signalling that risks to Japan's economic growth and for inflation to overshoot have partly diminished. BoJ foresees Japan's economy growing above its potential, which is supported by global economic growth and increases in consumption. The central bank expects inflation to increase moderately and per the target.

China: The PBoC left its 1Y and 5Y loan prime rates unchanged at 3.35% and 3.85%, respectively, aligning with Bloomberg consensus. The decision also follows PBoC holding its 7D reverse repo rate unchanged since it was cut back in July. However, the PBoC stated last week that it remains prepared to execute measures to support China's economic growth, including 'further lower(ing) the finance costs for businesses and households'.

United Kingdom: The UK's retail sales rose by 2.5% y/y in August, which beat expectations of +1.3% (+1.5% in July). Retail sales minus auto fuel rose by 2.3% y/y against the consensus of +1.1% (+1.4% in July). The numbers suggest economic growth may be on solid footing, though the Office for National Statistics noted that sales benefitted from warmer weather and end-of-season sales.

Fixed Income

Global Bonds: US Treasuries consolidated on Friday as yields ticked higher on profit-taking after the significant Fed rate cut last week. Nevertheless, economists remained confident of two more 25 bps rate cuts this year, as reflected in a Reuters poll, which should support sentiment in the bond market for the rest of the year even though short-term profit-taking remains a risk.

MYR Government Bonds: Malaysia's government bonds closed flat Friday as some net buying interest amid the strong ringgit was outweighed by pressure from profit-taking. The sentiment was not helped by BTC at the 7Y MGS auction below 2x when the amount on the sale of MYR5.5 billion was larger than market expectations.

MYR Corporate Bonds: There was better interest in the corporate bond market last Friday, supported by gains seen in the govvies market during the week. Pickup was especially noted on banking papers as well as power sector bonds. Meanwhile, notable trades include realignment on longer maturity PLUS (AAA). PLUS, 01/34 was repriced at 3.94%, 01/37 at 4.02% and 01/38 at 4.04%.

Forex

United States: By the end of the "Fed" week, the dollar remained traded within the past month's consolidation range, as the pressure from the surprising jumbo rate cut did not convince the market of the dollar bear narrative. The dollar index found some support last Friday after Fed Governor Michelle Bowman issued a statement explaining her dissent from her colleague's 50 bps cut decision. She justified a smaller rate cut move based on these reasons: 1) that the US economy remains strong and 2) that despite progress, inflation remains a concern.

Europe: The EUR was stable, but the GBP gained further to reach its strongest level since March 2022, propelled by the upside surprises in the UK's retail sales, suggesting the economy is on a rebound.

Asia Pacific: The BoJ maintained its interest rate at 0.25%, good news for the yen bears. During his press conference, BoJ Governor Kazuo Ueda's less hawkish remarks stated that uncertainties surrounding Japan's economy and the risks of inflation overshoot have partly diminished. This means the BoJ's interest rate outlook remains clouded for now. In China, the yuan has firmed sharply to its highest level since June last year after the PBoC maintained its one-year and five-year loan prime rates, defying the call for further cuts to prop up growth.

Malaysia: The ringgit strengthened again and marked the fourth straight day of a bullish run, past 2022's level, as the currency benefitted from the global risk-on mode and the recent Fed's large rate cut.

Other Markets

Gold: Gold reached a new all-time high on Friday, closing at approximately USD2,622, driven by the first US interest rate cut in four years and escalating geopolitical tensions.

Oil: Oil prices slipped slightly on Friday as traders locked in profits after gains from the previous day, fuelled by the US rate cut, despite the increasing threat of broader conflict in the Middle East.

Source: AmInvest Research - 23 Sep 2024