Global Forex Market
MARKET sentiments took a positive spin on improving China’s data flows, which was commodity supportive, ignoring the bearish views of IMF and OECD.
China’s exports recorded the strongest growth since February 2015, property markets continued to stage a comeback supported by a surge in new credit and 1Q2016 real GDP grew at 6.7%, meeting the median projection by economists. China’s home sales jumped 71% in March – its biggest gains since at least 2015 after People’s Bank of China lowered benchmark rates six times since November 2014. In response, the US dollar followed up its best day in more than a month to late-March highs against a currency basket along with strong flow of labour market data.
The initial jobless claims falling whopping 13,000 to 253,000 which matched the fewest since November 1973 and leave the bar set slightly lower to a Fed rate hike in the months ahead. The currency’s improved tone was also motivated by reduced worries on China, which has curbed demand for low-yielding, safer rivals like the yen and euro.
A better performing commodity tempted many players to dip a toe in riskier waters and edged away from safer shelters. The euro, as a result, slipped to April lows against the greenback, a move that gained added traction from negative press the 19-nation economy received today in data showing industrial production fell by a larger than expected 0.8% in February while inflation got revised to zero from an initial reading of -0.1% which the reading lowered the risk of deflation taking hold of the bloc. WTI Crude made a big move, rallying to its highest level of the year to trade close to US$42/barrel.
The yen backed off as hints of more stimulus being added by the Bank of Japan sent investors selling the currency, leaving the door open for further easing measures in the “safe haven” currency.
Asian currencies with the exception of Korean won and Taiwanese dollar were broadly traded on a cautious note. The biggest surprise to markets was Monetary Authority of Singapore (MAS) announcement to shift to a “neutral” policy stance with zero appreciation that caused the markets to react with varying degrees of excitement.
Leading the losses, Singapore dollar (SGD) fell 0.95% against the US dollar followed by yuan of 0.37% and Indian rupee of 0.27% respectively.
The ringgit (MYR) traded in a wide range of 3.84 to 3.92 with an appreciation bias in the earlier part of the week before succumbing to depreciation pressure on stronger US dollar flows. In the first half of the week, strengthening of ringgit was motivated by the rally in equity markets and the soar of crude oil prices on speculation that Saudi Arabia and Russia have reached a consensus on an output freeze.
As increase in Malaysia 5-year credit default swap dominated the flows towards the end of the week, ringgit was showing signs of depreciation pressure despite falling from a high of 2.8899 on Monday to trade below 2.860 on SGD/MYR.
US Treasury yields edged higher as most market players eased its government debt holdings in favor in higher-yielding corporate bond. On Friday’s 11:00 am pricing, the 2-, 5- and 10-year UST traded at 0.76%, 1.25% and 1.79%.
Malaysian Bond Market
Local govvies saw belly to long-end of the yield curve edged lower in response of continued foreign inflows. The week saw the re-opening of 20-year MSG ‘05/35 which came in with book-to-cover ratio of 1.99, driven by selective buying interest from local real money on the back of duration at an average yield of 4.242% with an issuance size of RM2.5bil.
Local govvies saw RM14bil trading volume, translating into daily average of RM3.5bil. This was higher compared to preceding week daily average of RM3.3bil. On Friday’s 11:00am pricing, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 3.23%, 3.38%, 3.71%, 3.77%, 4.09%, 4.24% and 4.58%.
In the secondary PDS market, we saw a lower volume in trading activities this week compared to last week. Total trading volume for the week stood RM2.2bil, averaging RM557mil daily compared to last week’s average of RM821mil. About 64% of the trading volume was contributed by the GG/AAA segment and 28% by the AA segment with the remaining 8% in the A segment.
In the GG/AAA segment, 2017-2025 Cagamas bonds traded at mixed to close at the range of 3.78%-4.30% with a collective trading volume of RM219 million. 2021-2035 DanaInfra Nasional Bhd bonds saw yields eased lower between 1-10 basis points to settle at the range of 3.99%-4.70%, with a combined total of RM140mil changed hands. 2020-2033 Projek Lebuhraya Usahasama Bhd bonds saw some demand with yield eased 3-13 basis points lower to settle at 4.01%-4.77%, with a total trading volume of RM175mil.
Elsewhere in the AA segment, Sarawak Energy Bhd’s ‘06/26 and ‘08/35 saw yields eased lower at 7 and 8 basis points to close at 4.67% and 5.03%, with a collective trading volume of RM60mil. Meanwhile, Krung Thai Bank Public Co Ltd’s ‘07/20 saw yield eased 1 basis point to close at 5.09%, with a total RM80mil changed hands. On the other hand, 2019-2026 BGSM Management Sdn Bhd bonds saw yield eased by 1-9 basis points to settle at the range of 4.66%-5.15%, with a total trading volume of RM145mil.
Ringgit IRS Market
As at Friday’s 11:00 am pricing IRS curve remained relatively stable this week, while 3-month Klibor remained unchanged at 3.70% this week.