Snapshot Summary

Global FX: Dollar fell as core August PCE inflation data rose less than July

Global Rates: Data and safe-haven demand guided UST yields lower last Friday

MYR Bonds: Bonds pared losses on lower UST yields while 30Y GII auction was weak

USD/MYR: Ringgit hovered near its two-year high

Macro News

US: Personal consumption expenditure (PCE) price index in the US rose by 0.1% m/m, following a 0.2% increase in July and aligning with expectations. Service prices increased by 0.2% m/m, while prices for goods saw a decline of 0.2% m/m. The core PCE index, which excludes food and energy, also rose by 0.1% m/m, down from July's 0.2% and below the anticipated 0.2%. Food prices edged up by 0.1%, while energy prices dropped by 0.8%. The University of Michigan's consumer sentiment index for the US was adjusted upward to 70.1 in September 2024, marking the highest level in five months. This revision came from an initial reading of 69 and surpassed market expectations of 69.3.

Fixed Income

Global Bonds: US Treasury yields fell last Friday. Pressing down on yields were the release of economic data and safe haven demand for treasuries arising from the Middle East tensions. The University of Michigan inflation expectations for the one-year period coming in at 2.7% at September versus a similar 2.7% as at August nudged UST yields lower, alongside the latest decline in the PCE inflation index. Aside, lower inflation readings in France and Spain sent Bund yields lower.

MYR Government Bonds: Ringgit government bonds posted losses though these were pared in late trading as players noted UST yields fell ahead of the US open. The earlier Malaysian govvies losses coincided with weak showing in the GII 03/54 reopening (MYR3 billion tender plus MYR2 billion PP) at 1.7x BTC, and profit taking activity after recent gains.

MYR Corporate Bonds: Corporate bond trading was firm as we noted more realignment on several names. Notable trades include AA3 Edra Energy. These included Edra 07/32 up 3 bps to close at 4.04%, 07/33 up 1 bps to 4.05%, and 07/35 unchanged at 4.11%.

Forex

US: The DXY index fell to just above the 100-level on Friday, after key US economic data signalled a cooling economy and reinforced expectations of further Federal Reserve rate cuts. The Fed-preferred inflation measure, PCE Price Index and its core, was growing in line for the former and slower, for the latter, than market expectations. At the same time, both personal income and spending was growing slower than consensus.

Europe: The euro was down 0.1% while the GBP was down 0.3%. Recent data from Europe indicates that inflation in France and Spain increased less than anticipated. As a result, market expectations for an interest rate cut by the European Central Bank in October have risen to over 90%.

Asia Pacific: The JPY firmed following Ishiba's narrow victory in Japan's Liberal Democratic Party leadership race. Ishiba, a former defence minister and critic of previous monetary stimulus measures, stated that the central bank's approach to raising interest rates was "on the right track." Markets had largely anticipated a win for hardline nationalist Sanae Takaichi, who had strongly opposed further rate hikes. In response, traders had been factoring in expectations of loose monetary and fiscal policies and a weaker yen in recent days. In China the yuan was supported but flat on the back of the recent stimulus push by authorities.

Malaysia: The ringgit firmed to around 4.12-level last Friday, hovering its two-year highs. The ringgit benefitted on some risk on mode in the global markets, which also provided certain Asian currencies some support.

Other Markets

Gold: The precious fell last Friday, down 0.5% to USD2,658/oz, due mainly to profit taking pressure while sentiment looks towards a macro data heavy coming week.

Oil: Oil prices continued to sustain strength. Major boost currently remains fears over escalation of tensions in the Middle East. Stimulus measures boost in China recently also aided levels.

Source: AmInvest Research - 30 Sep 2024