Global Forex Market
Sell-offs of the dollar are back on the table as it fell 0.16% to 97.534 albeit market players currently anticipating the phase-one trade deal signing ceremony between the United States and China. This is also partly due to the shrinking durable goods orders in November at 2% month-on-month (m-o-m) from +0.2% m-o-m in October (cons: -1.5% m-o-m). Apart from that, other key events showed improvements such as (1) November’s new home sales at 1.3% m-o-m (Oct: -2.7% m-o-m, cons: -0.3% m-o-m); (2) Chicago Fed national activity index at 0.56 points in November (Oct: -0.76, cons: -0.09); and (3) falling jobless claims to 222,000 (prev: 235,000, cons: 224,000) – number of Americans filing applications for unemployment benefits on week ending Dec 21, in a sign of ongoing labor market strength.
On the trade front, Beijing and Washington were still in the process of completing the necessary procedures while maintaining close communication to sign the deal. US President Donald Trump would be signing the trade deal with the Chinese President Xi Jinping for the first phase of the agreement sometime in January.
Meanwhile in the equities market, both the Dow and S&P500 ended the week by hitting the record high at 28,621 and 3,240 respectively.
Brent price surged 2.69% to US$67.92/bbl – the highest in over three months. The changed was buoyed by hopes of an end to the US-China trade dispute. Nonetheless, Russian Energy Minister highlighted that OPEC+ may consider easing output cuts in 2020.
With low volatility and as risk appetite picked up, the euro rose 0.08% to 1.110 against the weaker dollar. Rather a quiet week as the EU markets closed for Christmas and Boxing Day, the upcoming ECB Economic Bulletin is scheduled on Friday with higher hopes that the European policymakers will be more optimistic on the economy.
The pound slid 0.05% to 1.299 owing to the no-deal Brexit fears continue to swell amid thin market liquidity as traders take off for the holidays. With control of the legislature, British PM Boris Johnson has promised to leave the EU once and for all by Jan 31.
The Japanese yen depreciated 0.17% to 109.6 as October’s economic data releases shown; (1) coincident index contracted to 95.3 (September: 100.4, cons: 94.8); (2) leading economic index slipped to 91.6 (September: 91.9, cons: 91.8); and (3) prelim industrial production that plunged 8.1% year-on-year (y-o-y) in November (Oct: -7.4% y-o-y). However, there were several key events showing improvement such as November’s jobless rate at 2.2% (Oct: 2.4%, cons: 2.4%) and retail sales that shrank to 2.1% y-o-y from -7% y-o-y October (cons: -1.7% y-o-y).
The majority of Asia ex-Japan currencies closed higher, witnessing the Taiwanese dollar as the best performer, up by 0.19% at 30.116 followed by rupiah and yuan that appreciate 0.14% each to 13,958 and 7.000, respectively. However, rupee slipped 0.27% to 71.316 during the week.The ringgit rose 0.18% to 4.134 following October’s coincident index that went higher by 0.9% m-om (September: -1.2% m-o-m) and expanding leading index at 1.4% m-o-m from September’s 0.1% m-o-m. Appetite in the local bourse (FBM KLCI) declined by 0.4% to 1,604 while recording a net inflow of RM164mil.
US Treasuries (UST) Market
The US treasury yields fell 1-2 bps across the curve with trading volume were thin as investors vacate their offices for Christmas holiday. Nevertheless, the overall market sentiments were broadly positive as investors cheered over the news that China will cut import tariffs on a wide range of goods starting Jan 1 on over 850 products ranging from frozen pork to some types of semiconductors. Investors also have turned more bullish after the United States and China announced they have reached a “phase-one” trade deal. As at Friday, the 2-, 5-, 10- and 30- year benchmark UST yields stood at 1.62%, 1.72%, 1.89% and 2.32%, respectively.
Malaysian Bond Market
Amid a holiday truncated week, liquidity in the local market was thin. The MGS yield curve stayed largely unchanged save for 3- and 10-year tenure, which eased 0.5bps and 4.0bps respectively. Meanwhile the GII curve shifted higher, especially at the back-end of the curve. At the point of writing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 3.00%, 3.20%, 3.34%, 3.35%, 3.67%, 3.77% and 4.13% respectively.
Activities in the local govvies plummeted 75% to RM2.4bil from last week’s RM9.6bil. Matching the pace, the MGS papers tumbled 83% week-on-week (w-o-w) to RM1.2bil from RM7.0bil, recording 49% of the total volume. Interest in the GII fell 54% to RM1.2bil from RM2.5bil, occupying 47% of the week’s flows. Meanwhile, MTB/MITB trading activities dropped 18% to RM82mil from RM100mil in the prior week. Trades in the PDS market were 62% lower w-o-w at RM863mil from RM2.2bil. The GG/AAA segment contributed 65% of the flows, the AA-segment made up 28% and the A papers 7%.
In the GG/AAA segment, DanaInfra Nasional Bhd 2023–2049 IMTNs dominated the list with RM185mil traded between 3.302% and 4.361%. GENM Capital Bhd ‘07/23 issuance gathered RM60mil with yields closing at 3.806% followed by Sarawak Energy Bhd 2028–2033 tranches accumulating RM60mil at 3.734%–3.948%.In the AA segment, Southern Power Generation Sdn Bhd 2026–2034 IMTNs gobbled up RM50mil, changing hands between 3.879% and 4.349%. Next, Bumitama Agri Ltd ‘07/24 and ‘07/26 papers gathered RM40mil, trading at 3.828% and 3.938%, respectively. Lastly, ‘05/27 YTL POWER INTERNATIONAL BHD issuance was traded at 4.098%, amounting to RM20mil.
MYR Interest Rate Swap (IRS) Market
The IRS curve was seen higher by 0.6bps on average with half of the tenures were muted during the week. The 3-month Klibor stood at 3.35%. Elsewhere, the 5-year CDS eased 1.5% to 34.99bps.
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