Snapshot Summary

Global FX: The dollar declined on widening US trade deficit and weaker US ISM services

Global Rates: UST yields fell overnight, with the 10Y down by 9 bps

MYR Bonds: Ringgit corporate bond saw gains amid limited flows

USD/MYR: USD/MYR was down by 0.5% to close at 4.423

Macro News

UK: The S&P Global UK Composite PMI increased to 50.6 in January 2025 from 50.4 in the previous month, bouncing back from a 14-month low. This figure was revised from the initial estimate of 50.9 but surpassed the initial market expectations of no expansion at 50.

US: US ADP employment added 183,000 workers to their payrolls in January 2025, surpassing an upwardly revised 176,000 in December 2024 and exceeding forecasts of 150,000. The hiring momentum from Q4 continued into January, except for the manufacturing sector.

The ISM Services PMI for the US fell to 52.8 in January 2025 from a revised 54 in December 2024, missing forecasts of 54.3. This indicated slower growth in the services sector, driven by smaller gains in business activity (54.5 vs 58) and new orders (51.3 vs 54.4).

Fixed Income

Global Bonds: UST yields fell overnight, with the 10Y down by 9 bps. The release of the ISM non-manufacturing index down to 52.8 for January from 54.0 in December supported safe-haven bids. More safe-haven bids came from Trump's proposed Gaza solution, while trade war risks were also somewhat hinted at in UST trading. Meanwhile, the Treasury Department not indicating a rise in issuances for its next refunding plan for the next quarter ending in April further aided UST gains.

MYR Government Bonds: Local govvies action was highlighted by the MYR2.5 billion public tender of the 30Y MGS, which garnered 2.36x BTC (there's an additional MYR2.0 billion in a private placement). We sensed the market remained in the hunt for bonds amid new investment mandates at the start of the year and suspected players picking up bonds at current relatively attractive yield levels.

MYR Corporate Bonds: The ringgit corporate bond market mainly posted gains yesterday, but flows remained somewhat limited. Yesterday's gains include short-dated and AAA-rated Mercedes MTN 03/26, which fell 1 bps to close at 3.71%, and Air Selangor 12/27 (AAA), which fell 5 bps to close at 3.79%.

Forex

US: The dollar declined by 0.4%, reaching a one-week low as the 10-year treasury yield fell to a seven-week low. The dollar also faced bearish pressure due to the widening of the US December trade deficit to a two-and-three-quarter-year high and the US ISM services index dropping more than anticipated.

Europe: The Euro fell in early trading but clawed back up to post gains on a reprieve from the US -Mexico-Canada trade stalemate, for now, and allaying some risks on trade barriers on the EU. EUR daily low was around 1.0397 but closed near 1.040.GBP was also aided by the latest tariff developments and weaker USD, though today's BoE anticipated rate cut could dampen current GBP bids.

Asia Pacific: Robust Japanese wage data propelled the yen to a seven-week high against the weaker US dollar. Japan's wages adjusted for inflation rose by 0.6% y/y in December when the expectation was for a decline of 0.1%. The yuan weakened due to trade barrier risks after China retaliated against US tariffs. However, the measures are much smaller - accounting for a possible US20 billion worth of product imports from the US to China vs. USD450 billion of China's exports to the US being targeted for additional tariffs. The yuan weakness was limited slightly after the PBOC set the currency midpoint at 7.1693 vs. the dollar.

Malaysia: The weaker dollar, with the DXY rushing to below 108 yesterday, pressured USD/MYR down by 0.5% to close at 4.423. We express a continued cautious stance for the ringgit, seeing trade barrier risks involving China, and with traders anticipated to be careful before the US jobs data later this week.

Other Markets

Gold: Gold surged by 0.9% to reach USD 2,867/oz amid growing expectations of lower interest rates and lingering concerns over geopolitical risks. China signalled it will impose tariffs on US energy imports next week.

Oil: WTI and Brent declined 2.3% and 2.1%, respectively, due to an 8.664 million barrel larger than expected increase in U.S. crude inventories reported by the EIA and coupled with concerns that the ongoing US-China trade war could hinder global growth and energy demand.

Source: AmInvest Research - 6 Feb 2025