Yellen's Dovish Remarks

Highlights

The U.S. Treasuries (10yr) has been fluctuating within the 2.55% - 2.65% level due to the unexpectedly dovish remarks by Janet Yellen. Before the FOMC meeting, the yield dropped to 2.56% (post-FOMC) from 2.65% (pre-FOMC), when investors expected that the Fed would take a more hawkish tone due to the stronger than expected consumer price data at 2.0% yoy (against estimates 1.9% and prior 1.8%). FOMC decided to cut its bond purchases by another USD10 billion a month, to USD35 billion, saying there was "sufficient underlying strength" in the U.S. economy. Despite this, the Fed lowered its forecast for growth this year to a range of 2.1% to 2.3% from 2.8 to 3.0%, due to "unexpected contractions" in the first quarter as a result of the unusually harsh winter. The Fed acknowledged the recent increases in inflation and drop in unemployment, but Yellen gave no clear indication of when the Fed would start to rise interest rates. In the meantime, further escalation in Iraq violence could cause an impact to U.S. Treasuries due to its safe haven status.

Market data watch for this week:- U.S. Exisiting Home Sales (May) (f 4.73M v.s. p 4.65M) on 23 Jun 2014; U.S. CB Consumer Confidence (Jun) (f 83.5 v.s. p 83.0) / U.S. New Home Sales (May) (f 440k v.s. p 433k) on 24 Jun 2014; U.S. GDP qoq (1Q2014) (f -1.7% v.s. p -1.0%) on 25 Jun 2014; and U.K. GDO yoy (1Q2014) (f 3.1% v.s. p 3.1%) on 27 Jun 2014.

f = forecast / p = previous

Fixed Income Securities

Govvies market remained quiet and not affected by the FOMC decision. Although, some selling pressure on the MGS 03/17 (3-year benchmark) due to its lacklustre response (bid-to-cover 1.389) on the tender of re-opening. Malaysia's May CPI (actual 3.2% v.s. estimate 3.3%) released on late last Friday, and it does not seems to excite the govvies market. Overall, benchmark yields were traded mixed as compared to previous week, MGS 03/17 (+5 bps), MGS 10/19 (-2 bps), MGS 09/21 (+2 bps), MGS 07/24 (+3 bps), MGS 04/30 (-5 bps), MGS 04/33 (-2 bps) and MGS 09/43 (-7 bps). The most active traded securities were MGS 03/17, GII 07/14 and MGS 07/24, with trading volumes of RM1.39 billion (including WI), RM1.13 billion and RM866 million; and yield closed at 3.48%, 2.97% and 4.07%, respectively.

The Re-opening RM3 billion 3-year MGS 03/17 attracted a low response of 1.389 times of bid-tocover with average yield at 3.486% (high 3.530% / low 3.459%).

On the local PDS (including quasi-) market trading volumes increased by approximately 32% to RM2.45 billion against RM1.85 billion the previous week. The most actively traded securities were BGSM MGMT 12/22 (5.45%), TNB WE 01/30 (5.17%) and BGSM MGMT 12/16 (4.33%), with trading volumes of RM160 million, RM100 million and RM90 million, respectively.

Societe Generale has concluded the marketing roadshow for its RM1 billion sale of Islamic bonds in Malaysia and will decide on the size of its first issuance within days. (Reuters)

YTL Corporation Bhd closed its book on the RM500 million Bonds (AA1) with tenure of 5 years at yield of 4.45%.

UEM Sunrise Bhd closed its book on the RM400 million two-tranche Sukuk (AA-) with tenure of 5 and 7 years at yield of 4.71% and 4.90% respectively.

Malaysian Resources Corporation Bhd issued RM100 million Sukuk (Non-rated), with coupon rate of 5.80% / 5.05% and tenor of 5 years, from its RM680 million Sukuk Murabahah Programme, on 14 Jun 2014. (FAST)

Riverson Corporation Sdn Bhd issued additional RM50 million Bonds (AAA(fg)), with coupon rate of 3.8% and tenor of 1.25 years, from its RM200 million CP / MTN Programme, on 20 Jun 2014. (FAST)

N.U.R. Power Sdn Bhd had on 17 Jun 2014 issued the Notice of Cancellation of meeting of Sukukholders due to N.U.R. Power's decision to proceed with the proposed partial redemption of up to RM150.0 million Sukuk Mudharabah via open market. (FAST)