Global Forex Market
THE US dollar index continued to be weighed down this week amid the stronger euro following Macron’s win as well as disappointing economic data this week. It dropped 0.9% to close at 99.11 on Thursday. Some upside to the dollar, however, was seen towards the end of the week ahead of President Trump’s announcement of his tax reform plans and after ECB Draghi’s press conference. On the macro front, consumer confidence in April dropped to 120.3 from 124.9. Meanwhile, durable goods orders eased for the second consecutive month to 0.7%m/m in March from 2.3%m/m February.
Brent crude oil dropped 0.5% to US$51.7/barrel amid concerns over growth in US oil production and doubts that Opec can effectively lead to balance supply and demand. Moreover, prices were dampened after two key oilfields in Libya started to pump more crude oil.
The euro appreciated against the weaker US dollar by 1.4% following Macron’s 23.9% win in the first French presidential election amidst the risk-on mode. The pound continued to rise against the dollar this week by 0.7% to a seven month high of 1.2910 on Thursday, supported by positive pound sentiment, risk-on mode and higher net-short positions on the pound.
The yen depreciated by 1.9% against the US dollar as increasing risk appetite continues to see traders shifting away from safe haven assets. As expected, Bank of Japan (BoJ) maintained its monetary policy at -0.1% and 10-year Japanese government bond yield target at 0%. The central bank was also more optimistic about the domestic economy, upgrading its 2017 GDP growth to 1.6% from 1.5% previously. As for inflation, BoJ still expects to hit its 2.00% target in 2018.
All Asia-ex Japan currencies depreciated against the US dollar except the ringgit, Indian rupee, Taiwanese dollar, won and Singapore dollar.
In the latest MPC minutes, the Reserve Bank of India cited upside risks to inflation arising from price pressures excluding food and fuel as the reason for maintaining its policy rate unchanged at 6.25%. Korea’s GDP expanded in the first quarter of 2017 to 2.7%y/y from 2.4%y/y in 4Q2016, its highest growth since 2Q2016 led by manufacturing.
The ringgit was the best performing Asian currency against the greenback over the week as it strengthened by 1.2% as investors continued to shift to emerging currencies. Sentiment on the ringgit also improved following the rise in Bank Negara’s international reserve to US$95.7bil as at 14th April 2017 from US$95.4bil in March 31st 2017. Meanwhile, Malaysian Government Securities’ (MGS) 5-year and 10-year yields dropped by 6.9bps and 3.9bps to 3.705 and 4.076, respectively.
US Treasuries (UST) Market
THE US Treasury yields saw some upside this week as investors turned to riskier assets but had pulled back towards the end of the week amid the possibility of a federal government shutdown once funding expires on Friday. At Friday’s 11am pricing, the 2-, 5- and 10-year UST traded at 1.25%, 1.82% and 2.29% respectively.
Malaysian Bond Market
TRADING activities climbed this week compared to the previous week where benchmark local govvies registered a trading volume of RM16.6 billion compared to the previous week’s value of RM9.7 billion.
At Friday’s 11am pricing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 3.27%, 3.69%, 3.92%, 4.05%, 4.48%, 4.70% and 4.79% respectively.
However, the secondary corporate bonds market recorded lower trading activities compared to last week. Week to date, total trading volume was lower at RM1.08 billion compared to last week’s RM1.48 billion. About 52% of the trading volume was contributed by the GG/AAA, 44% by the AA segment and the remaining 5% by the A segment.
In the GG/AAA segment, notable trades included 2030-2036 Projek Lebuhraya Usahasama tranches, recording a total trading volume of RM114mil with yields closing unchanged or lower at 4.78%-5.18%. Also garnering interest this week was 2021-2026 Pengurusan Air SPV tranches recording a collective trading volume of RM100mil where yields traded mixed at 3.99%-4.33%. Meanwhile, Danga Capital bonds maturing in ‘04/20 and ‘02/26 traded at lower yields of 4.09% and 4.54%, respectively, with a collective trading volume of RM75mil ‘08/19 and ‘10/22 Rantau Abang Capital bonds also garnered some interest with yields trading lower at 4.00% and 4.24%, respectively with RM70mil changing hands.
Elsewhere in the AA segment, notable trades were seen within the banking sector with Hong Leong Bank bonds maturing in ‘06/19 and ‘09/19 whereby yields closed higher at 4.55% and 4.81%, respectively, with RM112 million changing hands. The power sector also saw some interest this week. ‘01/27 and 07/29 Sarawak Energy bonds saw yields close lower at 4.70%-4.90% with a trading volume of RM60 million. ‘09/17 CIMB Islamic bond garnered a trading volume of RM40 million with yields 4bps lower at 4.00%. Meanwhile, ‘11/27 MMC Corporation bond traded at lower yields of 5.53% with RM24 million changing hands.
MYR (IRS) Market
AS at Friday’s 11am pricing, the IRS curve fell due to the steady 1-month USD/ringgit volatility and strengthening ringgit as investors continued to shift towards Asian currencies. Elsewhere, the 3-month KLIBOR remained at 3.43%.
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