FX
Global
US and EU equities finished the session in positive
territories on China’s RRR cut over the weekend and stronger than expected US
earnings. ECB’s Noyer highlighted that QE was delivering a strong message to
the markets and ECB Draghi expressed confidence that Euro-area growth will be
more robust and inflation will reach its medium term target without undue
delay. In FX, USD firmed broadly against most currencies including EUR, AUD,
NZD, JPY. Oil prices were mixed with WTI rising and Brent unchanged.
AUDUSD bore the brunt overnight in a speech RBA
Governor Stevens delivered at a conference overnight in NY. Specifically he
suggested that he would be surprised that the AUD did not fall further. He also
said that question of whether to ease further “has to be on the table”. EUR/USD
weakness returned as markets finally woke up from its deep slumber over Greek’s
ability to meet repayment schedule. ECB’s Constancio puts Greek default in
focus – “The treaty does not foresee that a country can be formally, legally
expelled from the euro. So, if anything, some choice of that nature would have
to be taken by the Greek government, not by us.”
Day ahead economic calendar is light for US but US
earnings release is heavy with about 30% of S&P 500 due to report quarterly
earnings. For EU, focus on EC, GE Apr Zew survey expectations. In Asia, focus
on RBA Apr minutes (930am SGT), which could weigh on the AUD further. Day ahead
expect USD to consolidate; remain better buyers of USD on dips.
Currencies
DXY – Consolidation; Accumulate on Dips. USD
rebounded on renewed EUR weakness as markets finally woke up from its deep
slumber that Greek ability to meet repayment schedule remains in doubt. The
96.90 – 97.40 area remains key support; a break below could open way for
further downside towards 95.50 levels (38.2% Fibonacci retracement of 95.50 –
100.39). Day ahead may continue to see consolidation; intra-day range of 97.50
– 98.50. 4-hourly momentum is bullish bias. Week ahead brings Mar existing home
sales; Feb FHFA House Price index (Wed); initial jobless claims; Apr flash
manufacturing PMI; Mar new home sales; Apr Kansas City Fed Manufacturing (Thu);
Mar durable goods orders, cap goods orders (Fri).
USD/JPY – Consolidation.
USD/JPY is on a mild rebound back above the 119.00-levels, helped by the lift
in the EUR/JPY. For bullish extension to continue we need a firm break of
119.50 for a move towards the 120-levels. Otherwise, expect the pair to remain
in consolidative trades within 118.70-119.50 intraday. 4-hourly MACD and slow
stochastics are bullish bias.
AUD/USD – Bears
Reassert. AUD/USD pulled back this morning after RBA Governor
Glenn Stevens raised expectations of an interest rate cut next month. The fall
was exacerbated by the firmer greenback. The resurgence of the USD puts our
tactical bullish AUD view at risk and could knock the pairing back into
consolidation within 0.7530-0.7880. RBA Minutes is released at 0930 (SGT) and
will be scrutinized for cues on its next move and could reinvigorate AUD bears.
NZD/USD – Mild Upside Bias. NZD traded 0.7724 high during Asia hours yesterday in response to China
RRR cut announcement over the weekend. But NZD retraced lower towards 0.7642
low this morning amid USD strength and weaker AUD. Intra-day expect the pair to
consolidate in the range of 0.7580 – 0.7680. Daily stochastics is showing
tentative signs of turning lower from overbought territories. Talks of AUD/NZD
parity intensified again with the pair now at 1.0078. Cautious of NZ officials
jawboning NZD strength to keep up with competitiveness with G7 peers.
EUR/USD – Fade Rallies.
EUR/USD declined to a low of 1.0712 on continued focus on Greek’s ability to
meet repayment schedule. ECB’s Constancio puts Greek default in focus – “The
treaty does not foresee that a country can be formally, legally expelled from
the euro. So, if anything, some choice of that nature would have to be taken by
the Greek government, not by us.” Pair trades around 1.0740 levels this
morning; bias to fade rallies; intra-day range of 1.0680 – 1.08. We
continue to maintain our bearish EUR/USD view amid structural decline in Europe
fundamentals, concerns over Greece ability to meet repayment schedules, and
diverging monetary policies between US and EU. Week ahead brings EC, GE Apr Zew
survey expectations (Tue); EC Apr consumer confidence; IT Feb retail sales
(Wed); EC, GE, FR Apr manufacturing/services/composite flash PMIs; SP 1Q
unemployment; ECB Praet speaks in Berlin (Thu); GE Apr IFO; GE Mar import
prices; SP Mar PPI (Fri). Euro-area Finance Ministers meet over Fri-Sat on
Greece.
EUR/SGD – Consolidate
in Recent Range. EUR/SGD continued to trade a 1.44 – 1.46 range before
closing around 1.4479 overnight. Pair continues to pivot around 1.45 levels
awaiting for fresh cues. Day ahead could continue to see the pair consolidate
in recent range of 1.4420 – 1.4520.
Asia ex Japan Currencies
The SGD NEER trades around 0.61% below the implied
mid-point of 1.3412 with the top end estimated at 1.3142 and the floor at
1.3682.
USD/SGD – Consolidation. The USD/SGD is on a mild rebound back to the 1.35-levels, helped by the
firmer dollar tone overnight. Further upmoves are likely to be capped for now
given MAS decision to stand pat on policy. Expect pair to consolidate within
1.3430-1.3570 intraday with a slight bias to the upside. Intraday MACD is
showing mild bullish momentum and slow stochastics is indicating bullish bias.
We continue to favour accumulating USD in the pair on dips.
AUD/SGD – Pressing Lower. AUD/SGD fell below the 1.0400-handle from its Mon high of 1.0557,
weighed by bearish comments from RBA Governor Glenn Stevens. Pair threatens
support at 1.0376 (23.6% Fibonacci retracement of the Mar-Apr fall). A clean
break here exposes the recent low of 1.0243. Interim support for the day is
seen at 1.0340. Eyes on RBA Minutes, out later at 0930 (SGT) for any hint of a
interest rate cut in May and 1Q CPI tomorrow.
SGD/MYR – Choppy. SGDMYR
waffled around the 2.70-figure for much of Mon. Intra-day chart shows mild
bearish conditions although RSI indicates room for two-way trades. Ichimoku
cloud on the 4-hourly chart still supports price action and we expect some
interest to buy on dips. We see two-way action in this cross with support at
2.6710 and gains to be capped by 2.7200.
USD/MYR – Patiently Waiting to Buy on Dips. USD/MYR traded a low of 3.6065 during Asian session yesterday before
opening higher to trade 3.6400 levels this morning. While the pair could drift
lower towards 3.5950 levels (100 DMA), we remain better buyers in the pair on
dips. We continue to reiterate our view for Ringgit weakness off the back of
soft oil prices, risk of rating downgrade amid contingent liability exposure,
lower fiscal revenue and narrowing current account surplus remain unchanged.
Intra-day ahead range of 3.6200 - 3.6550 in focus.
USD/CNH – Head and Shoulders.
The USD/CNH is on the upmove this morning, pricing around the 6.20-figure.
Prices are supported by firmer USD. We still await the completion of the head
and shoulders pattern and the clearance of the neckline around the 6.19-figure,
which coincides with the 200-DMA. Bears are also frustrated by the 100bps RRR
cut over the weekend. However, we expect the current bounce to be a knee-jerk
reaction with barrier at 6.2067 likely to deter aggressive bids, if not 6.2292.
We still see interest to sell USD/CNH. Near-term support is seen around
6.1841 (Oct 2014 high) which coincides with the 61.8% Fibonacci retracement of
the Oct-Mar rally at 6.1842. Yesterday, USD/CNY was fixed 12 pips lower at 6.1255
(vs. 6.1267). CNYMYR was fixed 19 pips higher at 0.5865 (vs. 0.5846).
State Council released the negative list for free-trade zone investment in
Shanghai, Guangdong, Tianjin and Fujian. The negative list includes gas
exploration and metals mining. Three new free-trade zones will be opened today.
In other news, tax revenue for 1Q rose 3.4%y/y, slowing from the 9.9% growth in
the 1Q 2014.
USD/IDR – Bullish Tilt. The USD/IDR ended the session higher at 12893 yesterday but below its
intraday high of 12910. Pair is on the slow grind higher back towards the
13000-levels in line with the 1-month NDF with four-hourly momentum indicators
and oscillators showing bullish bias. Look for 12950 to cap upside intraday and
12810 to provide support. Foreign funds bought a net USD1.17bn in equities
yesterday – a multi-year high, but removed a net IDR0.53tn from their
outstanding holding of debt on 17 Apr (latest data available). 1-month NDF is
easing from its overnight high of 13118 back towards the 13000-figure with intraday
MACD showing bullish momentum and slow stochastics at overbought levels. The
JISDOR was fixed higher at 12875 yesterday from Fri’s 12863.
USD/PHP – Mild Bullishness.
The USD/PHP slipped lower below the 44.20-levels yesterday – a low not seen
since Mar, but could be short-lived given the firmer dollar tone overnight.
Look for the pair to rebound intraday, capped by 44.370 today. Support remains
around 44.16. 1-month NDF bounced mildly higher overnight towards 44.30-levels
with intraday MACD showing bearish momentum and slow stochastics rising from
oversold levels. Still for this week, conditions are still bearish with first
support seen at the 44-figure. Foreign funds sold off a net USD15.88mn in
equities yesterday.
USD/THB – Upticks.
The USD/THB continues on its bounce higher underpinned by the firmer dollar
tone overnight and continued expectations that a rate cut could be in the
offering under government pressure as well as and increasing political tension
over the draft constitution. Pair appears headed back towards the 32.500-level
with both intraday MACD and slow stochastics indicating bullish bias. Look for
upticks to remain capped by 32.500 for now, while dips should see support
around 32.350. Foreign funds sold a net THB0.29bn of equities yesterday, and
bought just a net THB0.76bn in debt.
Rates
Malaysia
Local government bonds had a slow start as the curve ended 1bp lower on
the belly. Noteworthy were trades done on the 15y MGS 4/30 which was reported
done to a low of 4.04% before closing at 4.07%. with a total of MYR250m worth
of trades done by close. All eyes set on the 7y SPK 7/22 retap today with MYR2b
auction size plus another MYR1.5b private placement. The auction will be
locally driven and likely with decent take-up.
IRS curve shifted lower by 1-2bps. 5y IRS was traded at 3.80%. Governor
Zeti's somewhat hawkish statements in the morning did not seem to convince
onshore players to push IRS higher. 3M KLIBOR stayed unchanged at 3.72%.
MYR PDS market was muted in spite of the stronger Ringgit. In the GG
space, PTPTN 21 was given at 4.10% while Prasa 28 tightened 1bp to 4.52%. We
think the overall GG curve is fairly priced. Down the credit curve AAA-rated
papers with more pickup (in yield) had seen keen demand especially last week on
Putrajaya/Telekom at 9y/10y, catchup rally might extend to vicinity tenors of
the same name or other AAA-rated names within the rating bracket such as Suria
KLCC. The rest of the trades seem to be possible cross trades from fund
reallocation.
Singapore
SGS yields moved up by 4-9bps overall underperforming SGD IRS which was
only up about 5.5-7.5bps, and hence tighter bond-swap spread. The SGS market
overall remain fairly volatile.
Asian credit space started the week soft, with selling seen across the
streets. Property industry took a hit again with Kaisa rumored not to be able
to repay USD52m today. In this case an Event of Default might be called. Kaisa
traded 6-8pts down with PB seen selling. Generally market is softer, with Indon
and Phillip traded 0.5-1pt lower. Chinese financials were around 5bps wider.
Malays were holding up rather well with PETMK and MALAYS supported well on the
previous level. Doosan Heavy Industries and Construction is issuing USD 5years
with the price guidance of T+115. The issuance is rated Aa3 as it is guaranteed
KEXIM. Bumi Serpong Damai is also out in the street issuing 5NC3 years USD
issuance with price guidance of 7%. They are the largest listed Indonesian
property developer. China Petroleum and Chemical Corp is said to be coming with
USD issuance this week. We saw some selling for oil and gas names in the
morning.
Indonesia
In line with our expectation, Indonesia bond market did move in a
positive tone and closed with a gain as a result of March U.S. deflation and
China reserve ratio requirement cut. Today we see that bond market would move
sideways with 10y yield ranging between 7.440% - 7.540% as there will be
minimal market sentiment domestically and globally. 5-yr, 10-yr, 15-yr and
20-yr benchmark series yield stood at 7.390%, 7.491%, 7.640% and 7.808% while
2y yield shifts up to 7.141%. Trading volume at secondary market was seen thin
at government segments amounting Rp5.79 tn with SR007 (3y) as the most tradable
bond. SR007 total trading volume amounting Rp1.69 tn with 657x transaction
frequency and closed at 101.412 yielding 7.704%.
DMO will conduct their sukuk auction today with four series to be
auctioned which are SPN-S08102015 (Coupon: discounted; Maturity: 8 Oct 2015),
PBS006 (Coupon: 8.250%; Maturity: 15 Sep 2020), PBS007 (Coupon: 9.000%;
Maturity: 15 Sep 2040) and PBS008 (Coupon: 7.000%; Maturity: 15 Jun 2016). We
believe that the auction will be oversubscribe by 1.5x - 2.5x from its indicative
target issuance while our view on the indicative yield are as follows
SPN-S08102015 (range: 5.820% - 5.920%), PBS006 (range: 7.500% - 7.600%), PBS007
(range: 8.280% - 8.380%) and PBS008 (range: 7.050% - 7.150%).
Corporate bond trading traded thin amounting Rp319 bn. PNBN05 (Bank
Panin IV Year 2010; Rating: idAA) was the top actively traded corporate bond
with total trading volume amounted Rp50 bn yielding 8.348%.
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