Snapshot Summary

Global FX: The dollar fell but remained above 100-level supported by the healthy US data

Global Rates: Robust data lifted UST yields with the 10Y near highest in three weeks

MYR Bonds: IRS rates continued to move up, alongside higher UST yields

USD/MYR: The pair rebounded as it found some floor circa 4.10 - 4.12 level

Macro News

Malaysia: Malaysia's PPI saw only a 0.3% y/y increase in August 2024, a significant decrease from the 1.3% rise recorded in the previous month. This marked the seventh consecutive month of positive producer inflation, yet it was the lowest increase in this streak.

Germany: The GfK Consumer Climate Indicator for Germany rose to -21.2 as October 2024 approached, up from a slightly adjusted -21.9 in the previous period. This figure surpassed market expectations of -21.5, primarily due to improvements in income expectations (10.1 compared to 3.5 in September) and an increased willingness to spend (-6.9 versus -10.9).

United States: The US GDP grew at an annualized rate of 3% in 2Q2024, consistent with the second estimate and exceeding an upwardly revised 1.6% growth in the first quarter. Notable upward revisions included private inventory investment, which rose to 8.3% from 7.5% in the second estimate, federal government spending at 4.3% up from 3.3%, and imports increasing to 7.6% from 7%. The number of individuals filing for unemployment benefits in the US fell by 4,000 from the prior week, totaling 218,000 for the week ending September 21st. This figure was below market expectations, which had anticipated an increase to 225,000, marking a new four-month low.

Fixed Income

Global Bonds: Robust data lifted UST yields with the 10Y near the 3.80% mark or highest in three weeks. Near 3.80% means the level is up around 18 bps since just before the FOMC meeting, as markets continue to debate a 50 bps cut in November. Also pressuring the sentiment was another auction, when Thursday saw the Treasury Department selling USD44 billion in 7Y notes. Demand was mainly decent at 2.63x bid cover. Elsewhere, Bund yields rose upon better consumer sentiment number but also after release of weak German data this week; reflecting more stimulus expectations.

MYR Government Bonds: Ringgit IRS rates continued to show an upward move, coming alongside higher UST yields. Meanwhile, MGS movements were mixed while there was caution on the front of the curve seeing the strong MYR rally recently. Nevertheless, papers shorter than 3Y remained bid. Players will focus on MYR3 billion reopening of GII 03/54 with MYR2 billion PP.

MYR Corporate Bonds: There was a slight bias towards net buying interest yesterday, but overall sentiment remained mixed. Realignment on select names continued. Yesterday we saw AA3 Edra with tenors 9Y-12Y closing mixed at 4.04% up to 4.13%.

Forex

US: The dollar dropped yesterday on some risk seeking appetite following China's stimulus announced during Asia session but found some support at above 100.50 from US healthy data. According to revised data by the BEA, the US economy bounced back from the pandemic stronger than previous estimation, with real GDP of 5.5% average from the second quarter 2020 to 2023, driven by robust consumer spending. And 2Q2024 growth expanded 3.0%, in line with second estimate but revised higher from first estimate of 2.8%. In addition, the initial jobless claims surprised to the downside again for second straight weeks.

Europe: Both euro and pound benefitted from the lower dollar as the former advanced 0.4% and the latter by 0.7%. On the data front, Germany's consumer confidence improved slightly and beating market forecasts but still far from pre-Covid positive trend.

Asia Pacific: The Japanese yen was steady at around 144.8 level amidst domestic political noises as the ruling Liberal Democratic Party gets to vote today on who will become the next prime minister. In China, the CNY gained to erase prior day's weaknesses after top China leaders pledges to support fiscal spending and stabilize the property sector during a Politburo. Among the new stimulus are, according to newsflows, the government plans to issue CNY2 trillion special sovereign bond this year and injecting up to CNY1 trillion of capital into its biggest state banks to increase their capacity to prop up nation's growth. In tandem, the AUD surged 1.1% from the good news coming out of China.

Malaysia: USDMYR did a technical rebound circa 4.10 - 4.12 level as the pair was already hovering in the oversold territory based on RSI technical indicators. Yesterday's PPI data showed further decline in producer inflation, suggesting that consumer inflation pressure will continue to be abating moving forward.

Other Markets

Gold: The precious metal hit a new high as expectations for further cuts by the Fed supported the price. It went up 0.6% to close at USD2,672/oz after hitting USD2,685/oz intraday high.

Oil: Oil prices continue to slide as Saudia Arabia was reported to increase its output in December, swelling supplies in oil markets. There were also a prospect of reviving Libya supplies as the eastern and western administrations agreed to appoint a new governor for Libya's central bank.

Source: AmInvest Research - 27 Sep 2024