Snapshot Summary

Global FX: The DXY index surged to its highest level since November 2022

Global Rates: UST yields rose to their highest since November 2023, driven by strong US NFP data

MYR Bonds: Local govvies weakened slightly as UST yield soared higher

USD/MYR: Ringgit rose slightly on stronger-than-expected IPI data and stable labour data

Macro News

Malaysia: Malaysia's unemployment rate slightly decreased to 3.2% in November 2024, compared to 3.3% in the same month the previous year. This marks the fourth consecutive month at its lowest level since January 2020.

Malaysia's IPI expanded by 3.6% year over year in November 2024, up from a revised 2.0% increase the previous month and surpassing market expectations of a 2.6% rise. This marked the eleventh consecutive month of growth and the fastest rate since August.

US: US NFP data saw 256,000 jobs added in December 2024, the highest increase in nine months. This followed a revised gain of 212,000 in November, exceeding market expectations of 160,000. Additionally, figures for October and November were adjusted downward by 8,000 jobs. The unemployment rate decreased to 4.1% in December 2024 from 4.2% in the previous month, coming in below market expectations of 4.2%.

According to preliminary estimates, the University of Michigan's consumer sentiment for the US declined to 73.2 in January 2025 from 74 in December 2024, the highest level in eight months and below the predicted 73.8.

Fixed Income

Global Bonds: UST yields rose to their highest since November 2023 after data showed NFP increased by 256k in December, surpassing economists' expectations. Bond trading suggests the Federal Reserve will wait at least mid-year before considering the next rate cut. Bund yields followed the UST higher, while inflation rose to 2.4% in December, which added to the weak bund trading.

MYR Government Bonds: The local government bond market weakened slightly ahead of the NFP release last Friday while also moving higher, in line with the UST yield. Meanwhile, authorities released details of the auction of GII 07/40, with an issuance size of only MYR3 billion, which was lower than expected. The low amount likely signifies the government's effort to reduce this year's overall fiscal deficit, slated to be at 3.8%.

MYR Corporate Bonds: The ringgit corporate bond market was more active last Friday, but the overall move was mixed. Flows were led by papers such as AAA-rated CIMB IMTN 07/35, which closed unchanged at 4.02%, and AA-flat FPSB 09/25, which closed at 3.80% (+1 bps).

Forex

US: The ICE DXY index surged to its highest level since November 2022, propelled by strong US jobs data, including higher non-farm payroll and lower unemployment rate and climbing consumer inflation expectations that ease the pressure on the Federal Reserve to cut rates. The CME FedWatch tool suggests that the Fed could pause its cut during this month's meeting and will start to cut again only in June. The safe-haven bid also prevailed as the US imposed more sanctions on the Russian oil industry.

Europe: Meanwhile, the euro slumped to a multi-month low near 1.024, weighed down by the greenback's broad rally and amidst lingering downside economic risks despite the ongoing ECB policy outlook. The British pound followed suit, plunging to its weakest since November 2023 as the stronger dollar, gilt selloffs, and concerns over Britain's public finances all took their toll.

Asia Pacific: The dollar-yen hit a fresh multi-month peak before trimming gains and turned red on Friday, though it still ended the week higher on upbeat US labour market figures. Speculation that the BoJ could raise its inflation outlook - amid stable wage growth and high import costs - has put investors on the lookout for possible policy shifts. This is on top of the safe-haven demand amidst the ongoing geopolitical tension. China's yuan initially advanced on Friday after the PBoC unexpectedly halted treasury bond purchases but quickly sank to fresh 16-month lows as markets digested the spike in yields and the widened US-China rate spread. Policymakers are sending a clear message that they will defend the currency amid ongoing policy easing and deflationary pressures by signaling a reluctance to let yields fall further.

Malaysia: The ringgit gained 0.1% on Friday and stayed within the new consolidation range despite last week's broad dollar rally. Malaysia's IP grew quicker at 3.6% y/y, faster than what the market was looking at, around 2.6%. At the same time, the labour market remained steady, with a 3.2% unemployment rate.

Other Markets

Gold: Despite a blowout U.S. jobs report fueling a spike in the dollar and Treasury yields, gold surged above USD2,700/oz for its fourth straight day of gains as safe have- demand kicks in following elevated geopolitical tension.

Oil: WTI and Brent surged after the US raised sanctions on Russian oil producers, vessels, and service providers, further tightening an already constrained supply picture.

Source: AmInvest Research - 13 Jan 2025