AmInvest Research Reports

Fixed Income & FX Research - 19 September 2023

Publish date: Tue, 19 Sep 2023, 10:43 AM
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Snapshot Summary…

Global FX: The Dollar Index Falls, Benefitting Other Major Currencies

Global Rates: The UST Market Closed Mixed While Bund Saw Bear-flattened Curve

MYR Bonds: Govvies Space Was Traded on Razor Thin Volume, Alongside Lower Volume in PDS Space

USD/MYR: The Ringgit Started the Week on Weaker Note Ahead of Key Central Banks’ Events

Macro News

Singapore: Singapore's non-oil domestic exports (NODX) experienced a significant decline of 20.1% y/y in August 2023. This marks the 11th consecutive month of contraction in NODX, primarily driven by decreases in both electronic and nonelectronic products. Electronic product shipments fell by 21.1%, with integrated circuits (ICs), PCs, and disk media products seeing substantial declines. Non-electronic product exports also decreased by 19.9%, driven by ships and boats, pharmaceuticals, and specialized machinery. The decline in exports was notable in several key trading partners, including the US, South Korea, Taiwan, China, the EU, and Japan, while increasing slightly to Indonesia.

Malaysia: Deputy Finance Minister II stated that it's not the right time to reintroduce the goods and services tax (GST) due to the global economy's slow pace. He emphasized the need for a holistic evaluation of GST implementation, taking into account various perspectives.

Fixed Income

Global bonds: Overnight, the UST market closed mixed with 2Y yield rose 2 bps to 5.05%% while 10Y yield fell 3 bps to 4.30%. Investors continue to digest the stillelevated PPI and sturdy retail sales data last week which may translate into further rate hikes by the US Fed. Safe haven demand was seen on growth concerns amidst news flow showing strikes held by United Auto Workers against major auto companies Ford Motor, General Motors, and Stellantis. On another note, US House Speaker Kevin McCarthy has proposed a deal to temporarily avert a US government shutdown. Demands include an 8% spending cut for domestic agencies and a resumption of border wall construction. A House vote on the measure is planned for Thursday. In Europe, the Bund curve bearish- flattened with 10Y yield rose 3 bps while 2Y yield climbed 4 bps. Recent ECB speeches showed rather mixed dovish - hawkish sentiment as Clara Raposo, Vice Governor of the Bank of Portugal, stated that the region could see inflation returning to 2.0% earlier than forecasted. On the other hand, ECB Governing Council member Francois Villeroy said the central bank will keep interest rates at 4.0% for as long as needed.

MYR Government Bonds: Govvies started the week on a quiet note with very little action seen despite tight prices were quoted on selected benchmarks. Investors continued to be cautious ahead of key FOMC meeting later this week. At most, the benchmark 15Y MGS 06/38 was traded on a decent RM293 million volumes. Generally, MGS/GII yields were little changed by the end of the day.

MYR Corporate Bonds: There were mixed movements in the PDS secondary market. Most of the trades on GG papers were bearish comprising usual names such as Danainfra and Prasarana, while triple-A rated papers were mostly traded bullish. Among notable trades were RM40 million on 04/52 Danainfra done at 4.40% (-19 bps), RM30 million on 08/30 AAA TNB done at 4.10% (-2 bps) and RM40 million on 11/31 A1 Bank Islam done at 4.26% (-4 bps).


US: The dollar fell slightly overnight by 0.1% to go alongside the decline in UST yields. Release of the NAHB housing market index which fell by 5 points to a 5-month low of 45 also pressured the dollar.

Europe: Meanwhile, EUR/USD was up 0.3% at 1.069. Recent less than hawkish comments by ECB officials added to EUR pressure. GBP interest continued to decline ahead of BoE meeting though futures pricing has 80% probability of a BoE hike, but a cautious mood still sustained for the GBP.

Asia-Pacific: Asian currencies were mixed in a cautious note to begin the FOMC week. CNY was weak on Monday, retreating from 1-week lows as favourable USD/CNY instigated dollar demand. Prior to market open, the PBOC set the midpoint USDCNY, at a 5-week high of 7.1736, or 50 pips firmer than the previous fix. Country Garden concerns also played on sentiment, including an initial deadline to pay USD15 million interest on dollar bonds. The company will have a 30-day grace period to pay the coupon before it is considered in default. Elsewhere, as new RBA chief Michele Bullock takes over the helm, AUD was firm around 0.644 level (+0.1%) ahead of meeting minutes of the RBA’s September meeting when it held interest rates steady for the third consecutive time.

MYR: The ringgit ended weaker against the US dollar yesterday as the greenback remained near its 6-month high ahead of central bank rate decisions this week, especially the FOMC. The USD/MYR was near 4.690 late yesterday and direction going forward is to be dictated by the Fed’s outlook updates at the upcoming FOMC.

Other Markets

Gold: Gold was about 0.5% higher as the USD weakened amid a cautious market before the batch of central bank meetings this week. Crude Oil: Oil prices continued to rise but gains were pared as Brent levels tested USD95, touching USD94.5 per barrel. Oil remained supported by supply outlook. Brent closed overnight +0.5% at USD94.43 per barrel.

FBM KLCI: The FBM KLCI fell due to profit taking activity, shedding 1.04 points, or 0.07% to close at 1,458. Foreign investors were the net buyers of Malaysian stocks with net RM102.6 million buying flows.

US Equities: US stocks steadied on Monday led by gains in energy and IT companies and rebounding from late last week's losses. However, gains were limited on cautious mood before FOMC. The Dow Jones Industrial Average edged up by less than 0.1%, S&P500 rose 0.1%, and Nasdaq was marginally higher by 0.01%.

Source: AmInvest Research - 19 Sept 2023

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