HLB Daily - OECD lowers growth projections...US NFP and 10-year MGS reopening key focus come Friday

Key Takeaways

Ø No surprise from ECB for holding rate unchanged at 0.05%. Price level in the euro area is expected to grow at a quicker pace of 0.3% instead of zero this year. Separately, OECD cut global growth forecast from 3.7% to 3.1% this year amid lower capital spending by corporations and weak demand dragging wage and consumption growth. US and China are expected to expand at a slower pace of 2.0% and 6.8% respectively. While employment data showed quicker pace of hiring among US firms, other data suggested slower economic rebound this quarter. Australia staged a surprise 0.9% QOQ growth in 1Q, boosted by robust exports.

Ø Dollar index edged lower as economic reports pointed to slower economic rebound in 2Q, overshadowing robust employment data. We expect bullish MYR today against USD on the back of soft overnight prints from the US and reports suggesting slower economic momentum in 2Q but caution that upbeat sentiments from tomorrow night’s NFP data might send USD higher. On the other hand, GBP might rally ahead of BOE’s meeting tonight.

Ø Trading volume in MYR govvies was over RM2.4b dealt. Reopening of the 10-year MGS 9/25 was announced with a tender size coming in at RM3b, which was lower than our expected size range. All eyes on the upcoming tender scheduled this Friday. Yesterday’s trading continue to skew towards the short-end with investors continue to bargain hunt on shorter dated MGS and GII in 2016-2017 space. Notably saw MGS 7/16 traded with volume of RM578m whilst GII 2/16 saw a collective RM330m traded with levels ending at 3.14%. Overall benchmark levels ended little changed except for the 10-year MGS 9/25 having edged 4 bps higher to close at 3.95%. With the Ringgit opening softer this morning, we opine sentiments to take on a more caution tone, although a cheaper Ringgit could pave the way for attractive bargain hunting for offshore investors.