THE US dollar traded on bid tone against most pairs in tight ranges into a typically quiet Thanksgiving session along with heightened geopolitical uncertainties and low liquidity. The greenback however failed to react much to stronger revised third-quarter gross domestic product (GDP) of 2.1% against earlier estimate of 1.5%.
Most of US data flows for the week were mostly close to expectations and there was no major improvement in the Federal Reserve’s preferred inflation measure with headline PCE inflation steady at 0.2% – the chief pillar of the US dollar’s broad buoyancy. Though mostly rangy trades, the greenback lost ground to safer peers of Japan and Switzerland following the downing of a Russian fighter jet near the Syrian-Turkish border.
The euro briefly hit a seven-month low on views the European Central Bank (ECB) will ease monetary policy further, including buying more debt and charging banks for hoarding cash in reaction to downbeat ECB’s Constancio’s comments over the eurozone inflation outlook ahead of next week’s ECB meeting. In the latest ECB Financial Stability Review, he was quoted of saying that developments since June made it even more difficult for inflation in the euro area to return to target of close to 2% by 2017. However, better news on Europe’s largest economy helped the currency stabilized above seven-month lows.
Benefiting from strong manufacturing PMI of 52.8 – its highest level posted since March 2014 and risk aversion trade with heightened geopolitical risk in Turkey that rippled across different asset markets, the yen strengthened against US dollar. The Bank of Japan’s minutes that showed its policy members to extend the time frame in achieving the 2% inflation target, has temporarily eased off downward pressure on the currency. With an exception to the rupee and the rupiah, Asian currencies in general ended the week on an appreciation bias against US dollar. Leading the pack were the ringgit, the won and the Singapore dollar. The won rose 0.67% against US dollar in response to movement in the yen, foreign inflows into KOSPI and increased selling of US dollar by local exporters. The Singapore dollar posted 0.58% gains against the US dollar as the economy narrowly averted technical recession.
The ringgit surged 1.57%% against US dollar to be top gainers among Asian currencies in response to series positive flows of market sentiments, among Premier Li Keqiang’s promise that China would invest in Malaysia’s debt papers, the successful selling of Edra Energy Global for RM17bil and the feel good factors from the recently concluded 27th Asean summit. Along with supportive crude oil prices ahead of next week’s Opec meeting and rising risk appetite in local debts by offshore players, the one-month non-deliverable forward rate fell from 4.278 to below 4.230 and cross the Singapore dollar/ringgit traded around 3.000 after hitting the peak of 3.0843 two weeks ago.
US treasury (UST) yield curve continued to flatten but at slower pace, as market players are getting ready for first interest rate hike since 2006. At Friday’s 11.00am pricing, the two-, five- and 10-year UST traded at 0.93%, 1.66% and 2.22%.
M’sian bond market
Local govvies rallied across the curve in response to appreciating the ringgit and decline in default risk on 1MDB assets sales. The week saw the re-opening of three-year Government Investment Issues (GII) ‘05/18 which garnered a bid-to-cover ratio of 1.860 times at an average yield of 3.584%
Local govvies saw RM11.5bil trading volume, translating into daily average of RM2.9bil. This was lower compared with the preceding week of total value of RM12.8bil traded, equivalent of daily RM2.6bil ahead of US Thankgiving holiday. At Friday’s 11.00am pricing, the three-, five-, seven-, 10-, 15-, 20- and 30-year benchmark Malaysian Government Securities (MGS) yields settled at a respective 3.43%, 3.69%, 4.11%, 4.21%, 4.47%, 4.54% and 4.76%.
In the secondary private debt securities market, we saw a higher volume in trading activities this week compared with last week. Total trading volume for the week stood RM1.2bil, averaging RM309mil daily compared with last week’s RM223mil. About 47% of the trading volume was contributed by the GG/AAA segment, 44% by the AA segment, with the remaining by the A segment.
In the GG/AAA segment, 2022-2045 tranche DanaInfra Nasional Bhd saw yield traded at mixed to close at 4.43%-5.08% with a collective trading volume of RM47mil. Meanwhile, 2017-2020 tranche Telekom Malaysia Bhd saw yield traded at mixed to close at 4.06%-4.38% with a total trading volume of RM71mil. The AAA rated Great Realty Sdn Bhd saw yield eased by 1 basis point to settle at 4.69% with RM35mil changed hands.
Trading activities in the AA segment this week were higher compared with the preceding week. AMMB Holdings Bhd ‘08/19 saw yield remained unchanged to close at 4.96% with a total trading volume of RM60mil. 2019-2020 tranche Malayan Banking Bhd saw yield traded at mixed to close at 4.95%-5% with a trading volume of RM32mil. Sabah Development Bank Bhd both ‘05/16 saw yield increased by 7 basis points to close at 4.36% and 4.35% with RM60mil done.
MYR IRS market
As at Friday’s 11.00am pricing, the IRS curve shifted lower on the long end curve following a stronger ringgit, while three-month Klibor increased 1 basis point to 3.77%.
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