Highlights

European central bankers distanced themselves from the Fed, by indicating they will keep benchmark interest rates low for an extended period of time. Furthermore, ECB and BoE both blindsided markets with decidedly dovish policy guidance, leaving the Fed as the only major central bank with any inclination to rein back stimulus. The contradiction shows that the global economy is not prepared for a self-sustaining growth, whereby economic stimulus package is crucial. In essence, most central banks are still maintaining easing monetary policy.

Last week, govvies market was selective and centered mostly on the medium-term papers (ie 3 to 5 years tenure). The recent talks on QE tapering in the U.S. still remained as the main issue hovering the local and foreign players. Seletive investors was taking advantage of the high yield to build up their books. Despite of the realignment in the government yield curve, demand on corporate bonds are still remain intact due to the scarcity of supply.

Egypt problems may trigger civil war and concerns over potential disruption oil supplies inflated crude oil price to its highest point, USD107/bbl (Brent), in over a year.

Market data watch for this week:- U.S. Initial Jobless Claims (forecast 340,000 vs previous 343,000) on 11 Jul 2013.

Fixed Income Securities

On the govvies market, MGS papers were traded mixed and trading volume was generally thinner as usual for the last 3 weeks. The most active traded securities were GII 05/20 (7-year GII benchmark), GII 07/13, MGS 07/16 (3-year MGS benchmark) and GII 10/23 (10-year GII benchmark, with trading volume of RM2.37 billion, RM1.17 billion, RM0.74 billion and RM0.57 billion; and yield closed at 3.70%, 2.99%, 3.22% and 3.74%, respectively.

On the local PDS (including quasi-) market, trading volume reduced to RM2.64 billion vs RM4.17 billion the week before, and the actively traded securities were PLUS 12/38 (4.56%), ABD 02/17 (3.75%), AmBank 10/22 (4.23%) and CIMB 04/60 (4.51%), with trading volume of RM160 million, RM150 million, RM135 million and RM100 million, respectively.

Etiqa Insurance Bhd, wholly owned by Maybank, issued additional RM500 mil Subordinated Bonds (AA1), with coupon rate of 4.13% and tenor of 10 NC 5 years, on 05 Jul 2013. (FAST)

Global News

Total nonfarm payroll employment increased by 195,000 in June, and the jobless rate was steady at 7.6%, according to a U.S. Bureau of Labor Statistics report released last Friday. (gantdaily)

The Reserve Bank of Australia kept its target interest rate unchanged at 2.75% for the second straight month following its July meeting, as was expected by a majority of Bloomberg surveyed analysts. (Bloomberg)

The Bank of England’s Monetary Policy Committee voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at GBP 375 billion. (Bloomberg)

The European Central Bank kept interest rates unchanged at a record low, 0.5%, amid rising bond yields in the region and pressure for President Mario Draghi to give investors hints on his future policy. (Bloomberg)

China said on Friday it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy's dependence on extravagant investment funded by cheap debt. (Reuters)

Asian currencies will gain some ground against the U.S. dollar in the next twelve months despite sputtering regional economies and dwindling yields, according to a consensus forecast in a Reuters poll. (Reuters)

European and US banks are facing the prospect of having to issue much more subordinated debt, and at a much higher cost, as regulators stamp out low leverage ratios and investors demand higher concessions for market volatility. (Reuters)

Korea National Oil Corp (A1/A+) has printed the first public global transaction from an Asian issuer in a month.

The state-owned oil company sold a CHF240m (USD252m) 5.5-year bond at 99.771 to yield 1.671% on a 1.625% coupon. (Reuters)

Fitch Ratings (Thailand) affirmed ING Bank NV's (ING Bank) THB5.74bn and THB4.26bn senior unsecured bonds due 2014 and 2016 respectively at 'AAA(tha)'. (Reuters)

Source: Kenanga