IT was not until the later part of the week when the US dollar suffered a major selldown as the US dollar index plunged 1.8% to trade below 97.0.
The dollar fell into a deeper hole in response to another batch of forecast missing US data. Weekly jobless claims increased to 294,000 from 282,000, missing forecasts of 280,000 and US monthly budget statement released during the week showed that the US government recorded a monthly deficit of US$52.9bil in March, above the expectations of US$43.9bil, with both receipts and outlays increased 8.5% and 13.6% respectively.
Meanwhile, the combination of soft retail sales data, contracted industrial production data, and the weaker-than-expected Empire manufacturing survey data diminishing the probability of the Fed commencing its tightening cycle in June. Thus the euro rose to one-week peaks above 1.07 against the greenback along with the positive upbeat of the industrial production data and the trade data.
The merchandise trade surplus for February improved to 20.3 billion euros compared to 7.9 billion euros in the previous month, with exports increasing 4% due to the weak euro since the launching of ECB’s QE programme.
Meanwhile, a recent survey from the ECB showed eurozone banks expecting loan demand from businesses and households to be strong in the coming months as the funding boost from the ECB massive stimulus plan supported more lending activity.
It was no surprise to note that Asian currencies ended the review period with a positive bias against US dollar. Top gainers were the ringgit followed by the Singapore dollar at 1.35 against US dollar, mainly due to the Monetary Authority of Singapore’s surprised move by holding off from further monetary easing, followed by rupiah, and Korean won.
Singapore’s central bank kept the slope, width and midpoint of the Singapore dollar’s policy band unchanged and said it would maintain its policy of a “modest and gradual” appreciation of the Singapore dollar.
Ringgit rose 1.51% against the US dollar to be the best performing Asian currency on the back of stronger commodity prices with the sharp drop in 1 month MYR NDF rate.
Oil prices have rallied during the week, with Brent oil prices rising above US$60/bbl for the first time in a month, supported by the weaker-than-expected US crude oil supply data and weak US dollar.
On the macro front, the World Bank has revised down Malaysia’s growth to 4.7% this year before normalising to 5.0% in 2016, with the country’s current account to remain a small surplus. Meanwhile, Malaysia has issued US$1bil 10-year securities at yield 3.04% and US$500mil of 30-year bonds with the yield of 4.24% to refinance the US$1.25bil of sukuk which will mature in June.
US Treasuries (UST) Market
US Treasuries rallied as the soft economic data released during the week increased the probability that the Fed will delay the raising of interest rates. At the time of writing, the 2, 5 and 10-year UST traded 710 basis points lower w/w at 0.48%, 1.30% and 1.89%.
Malaysian Bond Market
Local govvies saw some sell-off along the curve on Monday and Tuesday due to weakening MYR and relatively light trading session as market was showing lack of interest in a sideways market. The govvies traded marginally lower at the remaining trading sessions of the week.
The tender result for the new 5.5-year benchmark MGS with an issuance size of RM4bil was released on Tuesday. The new benchmark MGS ‘10/20 garnered a bid-to-cover ratio of 1.778 times. High, low and average yields were at 3.671%, 3.644% and 3.659%, respectively. The week saw RM9.9bil trading value, translating into daily average of RM2.5bil.
This was relatively low compared to the preceding week’s total value of RM18.9bil traded, equivalent to a daily RM3.8bil. As of Thursday’s close, the 3, 5, 7, 10, 15, 20 and 30-year benchmark MGS yields settled at a respective 3.35%, 3.65%, 3.80%, 3.89%, 4.13%, 4.22% and 4.59%.
The secondary PDS market also saw lower active trading this week compared to last week. Total trading volume for the week stood at RM2.3bil, averaging at RM568mil daily compared to last week’s average of RM874mil. 60% of the trading volume was contributed by the GG/A segment, 39% by the segment and remainder by the single A segment. Over in the GG/A segment, A bonds were heavily traded including 20182028 tranches of PLUS bonds which saw total trading volume at RM155mil, traded 111 basis points lower to settle at a range of 3.92% 4.69%.
A slew of Telekom bonds maturing 2023-2024 were well bidded as well, with the yields traded 19 basis points lower to close at a range of 4.36%-4.45% with a total of RM135mil done. Strong interest was also found in the 2019-2024 tranches of Aman sukuk bonds. 2015-2027 tranches of Anih Bhd bonds closed 320 basis points lower at a range of 3.80%-4.91%, with a collective trading volume of RM90mil.
Meanwhile, Gamuda ‘10/18 and ‘03/20 traded 10 and 4 basis points lower to 4.22% and 4.38%, with a total of RM15mil changed hands. Elsewhere, 2015-2016 tranches of Sabah Development Bank bonds saw total trading volume of RM30mil traded 25 basis points lower to settle at a range of 4.15%-4.25%.
MYR Interest Rate Swap (IRS) Market
MYR IRS yields increased 57 basis points, mainly at the longer end of the curve, due to the soft China growth data and the uncertainty outlook for interest rates in the US due to soft economic data. Three-month Klibor remained unchanged this week at 3.73%.
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