Treasury Pulse


  • Business
  • Saturday, 20 Jun 2015

Global forex market 

MARKETS took a net dovish stance on the Federal Open Market Commission (FOMC) announcement late Thursday as the FOMC left the target federal fund rate unchanged at 00.25%. More importantly, FOMC member projection for interest rates (dots projection) turned out to be more dovish than expected – median rate projection for end-2016 and 2017 have been revised down by 25 basis points to 1.625% and 2.875%.

Gains in the US Treasuries 10-year yields were reversed out sharply. Outlook of US dollar has turned more uncertain than ever and knocked the greenback to one-month lows against a wide swath of rivals. Once again, the Fed said that rates could rise later this year, repeating a familiar refrain that has already become a part of the dollar’s fabric. Doubts about when US rates will rise remained selling points for US dollar bears.

The yen dipped to a low 122.48 before recovering to the123.00 handle with Bank of Japan (BoJ) continuing to indulge in poker-faced contentment with the status quo and on the back of the yen selling against the euro and pound. Asian currencies ended the week on bullish setting against US dollar. Leading the pack were the won, the ringgit and Singapore dollar. The won gained 1.3% against the US dollar in response to the strengthening yen and expectation of a supplementary fiscal budget to offset negative impact from the Middle East respiratory syndrome scare.

Singapore dollar traded stronger on the back of the stronger euro and yen after sliding from a high of 1.3474 towards the 200-moving average of the 1.3274 handle with buying interest from leveraged names, local funds and a trade surplus that improved to S$6.6bil in May 2015 compared with S$5.8bil in the preceding month. At the time of writing, the ringgit gained 1.01% against the US dollar on stronger technical ground to be second best performing currencies in the week after cross Singapore dollar/ringgit consolidating in the 2.78-2.79 range, stable commodity prices, build-up in inflationary expectations and decline in one-month US dollar/ringgit volatility.

Strong corporate and institutional buying on large dips was seen after stops loss sales were triggered below 3.7300. Selling pressure on local equities, however, remained strong. Meanwhile, consumer price index rose 2.1% in May 2015 driven by increase in housing-related and services, compared with 1.8% in the preceding month.

UST Market 

US Treasuries yields eased across the curve largely in response to perceived dovishness at the Fed FOMC meeting. Also driving the behavior was the tough talk between Greece, International Monetary Fund and European Central Bank On Thursday closing, the 2, 5 and 10-year UST traded 5-10 basis points lower week-on-week at 0.63%, 1.63% and 2.33%.

Malaysian bond market 

Local govvies rallied across the curve in reaction to the outcome of the Fed monetary policy meeting and some demand by foreign institutions. The week saw the reopening of 7-year MGS ‘09/22 which garnered a bid-to-cover ratio of 1.954 times at an average yield of 4.002% Local govvies saw RM13.2bil trading volume, translating into daily average of RM3.3bil.

This was higher compared to preceding week of total value of RM7.4bil traded, equivalent of daily RM1.5bil on technical rebound of the ringgit. Short dated government papers were better supported as players shortened their portfolio duration. On Thursday, the 3, 5, 7, 10, 15, 20 and 30-year benchmark MGS yields settled at a respective 3.26%, 3.63%, 4.00%, 4.02%, 4.19%, 4.27% and 4.73%. In the secondary PDS market, there was a decrease in trading activities this week compared with last week. Total trading volume for the week stood at RM1.8bil, averaging RM456mil daily compared with last week’s average of RM802mil, with 74% of the trading volume contributed by the GG/AAA segment, 25% by the AA segment, with the remaining by the A segment.

Over in the GG/AA segment, 2015-2020 tranches of BGSM Management bonds were well bid, with the yields trading 25 basis points lower to close at a range of 4.04%-4.73% with a collective trading volume of RM39mil. Whereas the 2020-2032 tranches of PLUS bonds also saw the yields traded at mixed to settle at the range of 4.13% to 4.78% with a total trading volume of RM154mil. The A-rated Genting Capital ‘06/22 saw yields declining 10 basis points to 4.81% with only RM1mil done.

Trading activities in the segment this week is relatively low compared with the preceding week. Notable trade was 2018-2029 tranches of Tanjung Bin Energy Issuer bonds which garnered some interest from market players, with yields declining between 27 basis points to close at a range of 4.43%5.32% with RM31mil changed hands. The 2015-2031 tranches of Malakoff Power bonds traded mixed to close at 3.94%-5.75%, with RM135mil done. Meanwhile, UEM Sunrise ‘12/17 eased 8 bps to settle at 4.20% while the ‘12/18 remained unchanged at 4.36%, with a collective trading volume of RM40mil.

Ringgit IRS market

As at Thursday closing, the IRS curve shifted downward following the rally in the local govvies and the dovish tone from US FOMC. Three-month Klibor remained unchanged at 3.69% during the week.

For enquiries, contact: fx-research@ambankgroup.com or bond-research@ambankgroup.com

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