Treasury Alert - 5 May 2014

Good Morning

Wall Street shares slipped and investors retreated to long-dated government debt on Friday, as enthusiasm over strong U.S. jobs growth was undercut by flat wages and a decline in the number of people looking for work. The U.S. economy added 288,000 jobs in April, more than expected. April's U.S. jobless rate was 6.3%, down 0.4 of a percentage point, and the lowest since September 2008. Even so, the report raised some concerns as more than 800,000 people left the U.S. labor force and average hourly wages were unchanged in April. Traders also said that news on more violence in eastern Ukraine sparked a shift into the bond market. Pro-Russian rebels shot down two Ukrainian helicopters on Friday, killing two crew members, while Moscow accused Kiev of wrecking hopes of peace by launching a "criminal" assault to retake the separatist-held town of Slaviansk. There were reports that over 40 people were killed in the Ukraine city of Odessa followed by reports that Russia called for a UN Security Council meeting for the weekend over a Ukrainian army operation in Slanviansk Selling in U.S. Treasuries was modest in short- and medium-dated notes as investors responded to an increased likelihood of interest-rate hikes from the Federal Reserve. Investors moved into longer-dated Treasuries. The jobs figures bumped up the odds of the Federal Reserve raising interest rates sooner in 2015, with expectations for a rate increase by June 2015 increasing to about 56% from 47% a day earlier. Yields on U.S. 30-year bonds dropped to their lowest in more than 10 months, falling for a fourth straight session. The 30-year bond yields fell as low as 3.34%, their weakest level since June 19, 2013, U.S. 10-year note yields, meanwhile, slid to 2.57%, a three-month trough. Yields hit session highs of 2.70% following the jobs number. Gold rose more than 1%, its biggest daily gain in two months, as rising geopolitical tensions and heavy short-covering helped bullion reverse an initial sharp sell-off after mixed U.S. job data. Despite US jobs data and Ukraine-Russia geopolitical issues, FX market ended virtually unchanged. USD/JPY rose sharply after the jobs data to as high as 103.02 yen but dropped back to a nearly flat 102.18 yen. EUR/USD fell to 1.3812 before rallying back to 1.3881 and closing at 1.3872 - unchanged from Thursday's close. AUD/USD fell to support at 0.9203 immediately after the US payroll data before rallying to close at 0.9277 - unchanged from Thursday's close.

Linda Lopez

Derivatives Sales

Global Markets, RHB Bank Berhad

Level 3 Tower Two, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur.

DL +603- 92072831 | M +012-3703084  | F +603 9287 4888

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