THE US dollar weakened across the board due to a combination of listless summer trade, decline in US yields and disappointing corporate earnings results.
Nine of the 10 major S&P sectors ended on softer note. Macro flows, however, continued to remain upbeat with weekly jobless claims plunged 26,000 to a seasonally adjusted 255,000 – the best number since 1973 – the year Secretariat won the Triple Crown in horse racing. The report offered the final glance of the job market before the Federal Reserve renders a decision on July 29.
Meanwhile, the Conference Board LEI for the US increased again in June, with the yield spread and building permits continuing to make large positive contributions to the index and prices of existing homes sold in the US vaulted to a record high in June, topping the mark set in 2006, as sales increased at their strongest pace in more than eight years.
The euro rose from lows near 1.084 to highs of 1.099 – tested the upper limits of a confined range, touching its strongest in more than a week attributed to profit-taking on the US dollar’s advance and constructive news on the Greek debt crisis. Bearish sentiment ebbed in news that Greece’s parliament had approved another strong dose of austerity, the price to win a third bailout of about 85 billion euros from its lenders and remain in the eurozone. Next deadline is Aug 20 when 3.2 billion euros must be paid to the European Central Bank. Spain, another soft European Union nation is also beginning to show sign of improvements.
The yen held relatively steady in a tight trading range of 123.5-124.3 given the lackluster performance on Nikkei and decline in commodity prices over concerns about ample supply that weighed on trading sentiment. Brent crude fell to US$55.54 a barrel, the lowest since March.
Asian currencies ended broadly weaker against US dollar due to selling in local equities. Top losers were the baht that fell 1.2% followed by the won of 0.7% and the rupiah of 0.3% against the US dollar.
Foreigners sold Thai shares for the fourth straight days, which drove SET index to close below 1,450 – its lowest level since start of the year. The Korean KOSPI extended its losses to below 2,041 from start of the week of 2,073 due to biggest foreign selling seen in electronic and motor-related counters.
The ringgit held relatively steady in a tight range of 3.793-3.810 given the stability in cross Singapore dollar/ringgit and range bound one-month volatility. Selling pressure on local equity, rise in five-year credit default swap rate, fall in oil prices and more-than-expected drop in foreign exchange reserve, however, kept the ringgit on bearish bias against the US dollar. Bank Negara’s international reserves fell 4.7% to US$100.5bil from end-June – the lowest in almost five years. Year-to-date, the reserves had contracted by 13.3% or US$15.4bil respectively.
US Treasuries (UST) yield turned bull-flattening reflecting a mixture of positive development in Greece and selling pressure in global equities. At yesterday’s 11.00am pricing, the two-, five- and 10-year UST traded at 0.69%, 1.63% and 2.27%.
M’sian bond market
Trading activities in local govvies were heavier this week as players came back from Hari Raya Holidays. Local govvies rallied following S&P Ratings’ comments that the increased in contingent liabilities of Malaysia will not affect its reaffirmed rating of A- with a stable outlook in February. The weaker performance of the local equity market also contributed to the increase in demand for the bond market.
Local govvies saw RM17.8bil trading volume, translating into daily average of RM4bil. This was higher compared with the preceding week’s total value of RM8.6bil traded, an equivalent of RM2.2bil daily. At yesterday’s pricing, the three-, five-, seven-, 10-, 15-, 20- and 30-year benchmark Malaysia Government securities yields settled at a respective 3.18%, 3.52%, 3.87%, 3.94%, 4.21%, 4.32% and 4.68%.
In the secondary private debt securities market, we saw an increased in trading activities this week compared with last week. Total trading volume stood at RM1.2bil, averaging at RM313mil daily compared with last week’s RM244mil. About 60% of the trading volume was concentrated in the GG/AAA segment and the rest in the AA & A segments.
In the GG/AAA segment, 2023-2045 tranches DanaInfra Nasional Bhd bonds traded mixed to close at the range of 4.18% to 4.94% with a collective trading volume of RM180mil. Meanwhile, the 2016-2030 tranches Danga Capital Bhd bonds traded at a mixed to settle at the range of 3.69%-4.69% with a total of RM135mil traded. The AAA rated Aman Sukuk Bhd ‘05/25 saw yield declining 4 basis points to settle at 4.47% with RM45mil changed hands.
Trading activities in the AA segment this week were relatively higher compared with the preceding week. BGSM Management Sdn Bhd ‘12/15 remain unchanged at 4.01% whereas the ‘12/22 saw yield declining 5 basis points to close at 4.85% with a collective trading volume of RM150mil. Sabah Development Bank Bhd ‘09/15 and ‘02/16 yield increased 5-6 basis points to close at 4.36% and 4.2% respectively, with a total of RM11mil done. Meanwhile, Sarawak Energy Bhd ‘01/22 eased 2 basis points to settle at 4.47% with a total trading volume of RM40mil.
Ringgit IRS market
As at yesterday’s pricing, the IRS curve shifted lower marginally in the longer end of the curve reflecting the decrease in uncertainties from the Euro area. 3-month KLIBOR remained unchanged at 3.69% during the week.