Snapshot Summary

Global FX: Support for the dollar came from better-than-expected home sales data

Global Rates: UST yields rose as the market seemed daunted by a large supply

MYR Bonds: Bonds were traded sideways with interest slanted towards GIIs

USD/MYR: Ringgit rally continues with levels yesterday seen near 4.129

Macro News

China: The People's Bank of China (PBoC) reduced its one-year policy loan rate, the medium-term lending facility (MLF), by 30 bps, bringing it down to 2.0% from 2.3%. Additionally, the PBoC removed a net CNY291 billion from circulation, the largest liquidity withdrawal since December 2021, as it shifted its focus to short-term policy tools. This adjustment in its policy framework aims to influence market borrowing costs better and align with international practices.

Australia: Australia's CPI increased by 2.7% y/y in August 2024, falling short of market expectations of 2.8% and down from July's 3.5%. This marks the lowest CPI figure since August 2021 and brings it within the central bank's target range of 2 to 3% for the first time in three years, largely due to the effects of the Energy Bill Relief Fund rebate.

US: Sales of new single-family homes in the US fell by 4.7% m/m in August 2024, reaching a seasonally adjusted annual rate of 716k units. The decline partially offset the revised 10.3% increase from the previous month but surpassed market expectations of 700k units. The decrease was primarily attributed to a significant 17.8% drop in the West, where sales hit a three-month low of 152k units.

Fixed Income

Global Bonds: UST yields rose as the market seemed daunted amid another week of large issuances. The 5Y UST was spotted up 7 bps as yesterday saw a USD70 billion auction of the tenor, where BTC was 2.38x versus the prior auction of the tenor, which was 2.41x. Indirect bidders, including foreign central banks, bought 70% of the amount sold. Yields rose as players await the PCE price index release by Friday, where the expectation is for a smaller 0.1% m/m vs 0.2% previously.

MYR Government Bonds: Bonds were traded sideways with interest slanted towards GIIs as liquidity conditions in the Islamic space seemed to improve gradually. Also, the details for reopening GII 3/54 were announced while we saw WI near 4.185%. Meanwhile, IRS rates across the tenures moved higher, with the 5Y last at 3.415%.

MYR Corporate Bonds: Corporate bonds were dealt with mixed, and we noted that trading included the names not usually traded, suggesting further realignment along the credit space. Notable trades yesterday include AAA-rated Danum 02/34 at 3.95% (+3 bps) and Danum 02/35 at 3.97% (-2 bps). There were debuts along SEP Resources (AA1), such as 10Y SEP 09/34 at 4.13%.

Forex

US: Some support for the dollar came from the better-than-expected home sales figure, at 0.716 million compared to the market forecast of 0.70 million. In addition, the dollar rose to follow the uptick in the UST yields as investors readjusted their Fed's interest rate outlook.

Europe: The euro and the pound fell amidst the dollar's rebound. The lack of meaningful data flow from the Eurozone and the UK meant the dollar's move mostly dictated the currencies' movements.

Asia Pacific: The yuan was flat around the 7.034 level, paring recent gains on the back of PBoC support measures. Yesterday, the PBoC cut its 1Y medium-term lending facility MLF by 30 bps to 2.0%. AUD fell 1% in response to falling inflation. Consumer prices slowed to a three-year low in August, and core inflation reached its lowest level since early 2022.

Malaysia: The ringgit strengthened to close at 4.129 against the US dollar, reaching its highest level since June 2021. Market expectations fueled this rise that the Fed might loosen another 50 bps at the next meeting.

Other Markets

Gold: Gold soared to another record high before retreating to USD2,660 as UST yields rose.

Crude oil: Oil prices fell by more than 2% as concerns about supply disruptions in Libya diminished, while worries about demand persisted despite China's recent stimulus measures.

Source: AmInvest Research - 26 Sep 2024