Global Forex Market
The dollar surged by 1.14% to 98.496 largely underpinned by stronger economic data, signalling that the US economy remains resilient despite concerns over slower global growth.
Data released this week includes: the ISM January manufacturing index that climbed to 50.9 points from 47.8 in December (cons: 48.5 points); (2) December factory orders at 1.8% m/m from -1.2% m/m in November (cons: +1.2% m/m); and January ISM non-manufacturing PMI came in better than expected, expanding to 55.5 from 54.9 in December (cons: 55), marking the strongest expansion since August 2019.
The dollar received additional impetus towards the end of the week following the announcement of the Chinese government to lower tariffs on US imported products worth of US$75bil. Separately, President Trump was acquitted by Senate in his impeachment trial.
Oil prices saw Brent crude plummet 5.55% to US$54.93/bbl. Mid-week, the commodity plunge to its one-year low owing to the rising fears of lower crude demand by world’s biggest importer, China, amid the coronavirus outbreak. However, the downside was mitigated following news on Opec+ considering further output cuts to compensate for a drop in demand caused by the coronavirus.
The euro depreciated by 0.99% to 1.098 largely underpinned by the stronger dollar, added with poor economic release. The pound experienced a mild sell-off, depreciating by 2.08% to 1.293 after British PM Boris Johnson laid out a hard-line approach to Brexit negotiations with Brussels, fuelling renewed fears that the UK will leave the EU without a trade deal in 11 months.
The yen plunged by 1.51% to 110.0 as risk appetite gradually recovered following a positive tilt in developments in global markets.
The majority of Asia ex-Japan currencies strengthened against the dollar save for the yuan in view of the rout at the start of the week and the Singapore dollar, which came in as the worst performer during the week. It depreciated by 1.53% to 1.386 after the Monetary Authority of Singapore signalled its decision to inject monetary stimulus later in April.
Meanwhile, the won came in as the best performer up 0.99% to 1180 partly due to strong foreign interest into its equities market, recording a net inflow of US$791mil.
The peso appreciated by 0.26% to 50.754 as the Philippine central bank slashed its policy rate by 25bps to 3.75% as pre-emptive measure.
Besides, Bank of Thailand also lowered its policy rate by 25bps to 1.00% while the Reserve Bank of India kept the interest rate on hold at 5.15%, albeit opening door for potential cuts.
The ringgit fell 0.60% to 4.123 moving in tandem with the yuan. Despite the local bourse rebounding by 1.42% to 1,553, foreigners turned net sellers with a total outflow of RM285mil.
Key events released during the week include: manufacturing PMI deteriorating to 48.8 in January from 50.0 in December; December industrial production slowed down 1.3% y/y from 2% y/y in November; and unemployment rate that was recorded at 3.3% y/y in December from 3.2% y/y in November.
US Treasuries (UST) MarketThe UST saw a sold-off across the curve by 9-11bps underpinned by a slew of positive catalysts, fuelling risk appetite which includes: (1) the US continuing to present good economic data which signals further signs of US economic divergence against the rest of the world; growing optimism that the coronavirus will be contained; and China’s decision to roll back tariffs on more than 1,700 US imports. As at Friday, the 2-, 5-, 10- and 30-year benchmark UST yields stood at 1.43%, 1.44%, 1.62% and 2.09%, respectively.
Malaysian Bond Market
Activities in the local bond markets picked up towards the end of the week, in tandem with global risk appetite. The MGS curve steepened slightly with the short-end of the curve fell 3–4bps while the longer end added 1–2bps. Likewise, the short end of the GII curve eased about 3bps while the long end added 1–2bps.
Nevertheless, the focus of the week was on the reopening of the 30Y GII benchmark maturing on November 2049 which garnered a strong BTC of 2.328x on the back of an issuance size amounting to RM4.0bil including RM1.5bil of private placement.
The auction closed with a high/low of 3.792% and 3.747% while averaging at 3.780% mainly driven by interest from local investors. At the point of writing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 2.82%, 2.93%, 3.04%, 3.10%, 3.27%, 3.43% and 3.76% respectively.
Trading volume in the secondary local govvies segment slid 10.4% w/w to RM23.4bil from last week’s RM26.1bil. Matching the pace, the MGS papers traded lower by 16% w/w to RM13.3bil from RM15.8bil, contributing 57% of the total volume.
Also, interest in the GII slipped 1% w/w to RM9.5bil from RM9.6bil, occupying 41% of the week’s flows. MTB/MITB trading activities dropped 21% to RM554mil from RM700mil of the total trade in the prior week.
Nevertheless, Sukuk Perumahan Kerajaan’s total trade amounted to RM50mil this week. The GG/AAA segment contributed 80% of the flows while the AA segment constituted 18% and the A papers made up less than 2%.
In the GG/AAA segment, DanaInfra Nasional Bhd 2023–2043 IMTNs dominated the list with RM735mil of total volume, trading between 3.035% and 3.7511%. These were followed by 2021–2027 Khazanah Nasional Bhd tranches which accumulated RM465mil at 2.986%–3.329%. Besides, Prasarana Malaysia Bhd 2023–2042 IMTNs gathered RM280mil with yields closing between 3.069% and 3.771%.
Meanwhile in the AA segment, Malayan Banking Bhd ‘10/25 papers gobbled up RM140mil, changing hands at 3.344% and 3.345%. Next, Tanjung Bin Energy Issuer Bhd 2027–2030 IMTNs gathered RM120mil, trading between 3.658% and 3.864%. Last but not least were Kuala Lumpur Kepong Bhd 2029–2034 tranches which traded at 3.567%–3.768% amounting to RM85mil.
MYR Interest Rate Swap (IRS) Market
The IRS was seen easing 2–5bps across the curve while the three-month KLIBOR dipped 1bps to 3.09%. Elsewhere, the five-year CDS fell 13.4% to 36.18bps.
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