- On Thursday, US Treasuries consolidated ahead of the long weekend. Macro data was focused on producer inflation. The PPI for the month of Mar fell 0.1% mom against consensus of zero growth, but UST players didn’t pay too much heed to this just because the market had already earlier rallied on Wednesday. Initial jobless claims fell to 2,028K in the week ended 8 Apr from 96.9 in Mar.
- MYR opened with gains in reaction to USD declines overnight prompted by Trump’s comments on USD being too strong. Though gyrating wildly, MYR kept its gain as the USD continued its declines this time against the AUD. The rest of the session saw USD halting its decline before further selling in the London session drove MYR to break below 4.4200 and end the day at 4.4125.
- Malaysian sovereign bonds strengthened, tracking UST gains after US president stated USD appeared to be too strong and that he prefers a low interest policy. Elsewhere, the RM4 billion new 5-year GII auction garnered firm demand with bid-cover at 2.77 times, and average yield 3.948%, tighter than WI 3.97/96% quoted a day prior.
- Bank Negara Malaysia unveiled a four-prong measure to 1) promote a fair and effective financial market, 2) improve liquidity in the bond market, 3) provide additional foreign exchange (FX) flexibility and 4) strengthen the financial market infrastructure. Specifically, under the second prong to improve liquidity, of most interest to the country's rates and fixed income markets is the central bank's pledge to allow wider but regulated short-selling of Malaysian government bonds to all resident entities. This compares to the existing framework which only allows licensed banks and investment banks to conduct regulated short-selling. Primarily, short selling means MGS can be an instrument to hedge interest rate exposure, especially longer tenor exposure of 1-year and longer. We are favorable towards this new step taken by the central bank, for this allows more efficiency in managing risks on the part of the investor.
- IndoGBs were traded firmer after Trump commented that USD has been strengthening too much. IDR strengthened to 13255 level and bonds followed suit on the back of offshore inflows. Bonds were biddish since the market open and kept the positive tone until close. The 10-year benchmark reached 7% again and might test sub-7% next week. Market volume decreased to IDR12 trillion and dominated by bonds maturing in over 10 years (51%).