RHB FIC Rates & FX Market Update - 3/4/15

3 April 2015

Rates & FX Market Update

Focus on US NFP Data to Drive Market Sentiment; MYR Led Asian Currency Gains  

Highlights

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¨    10y UST yield headed back higher to 1.9%, negating much of the gains from the previous day as the two-month low jobless claims dismissed the slower ADP report the day prior. The US NFP data will take center stage later today where a larger than expected print should intensify earlier rate hike expectations. Nevertheless, the greenback was weaker against most major crosses on concerns of weaker export orders as suggested by weaker ISM prints. In Europe, core EGB’s including UK Gilts fell as investors eye crucial US data while demand for core EGBs are likely to be bolstered by a lack of progress on Greek talks ahead of a holiday shortened week. Aside, the French government successfully reopened (EUR8bn) the 10y, 11y and 30y papers at record low yields of 0.46%, 0.51% and 1.09% respectively, garnering an average BTC of 1.88x, highlighting investors’ appetite for long-end EGBs amid ECB’s PSPP. In Australia, ACGB yields gapped lower as prospects of a RBA rate cut next week intensified following a weaker trade deficit print; AUDUSD traded below 0.7580 weighed by poor trade balance data.  

¨    Asian currencies broadly gained overnight led by the MYR, while DM Asia govie bonds mostly gained. KTB yields edged lower as investors continue to price in further easing by BoK following soft CPI prints alongside a contraction in manufacturing PMI data. HKGBs and SGS yields edged lower as PMI prints in both countries suggest slowing business activity amid global growth concerns where we expect MAS to widen the NEER currency bands in anticipation for further depreciation of the SGD.

¨    MYR led outperformances among Asian currencies overnight, capitalizing on the weaker USD as the greenback’s bullish momentum was dampened by weaker ISM prints which indicated a slowdown in US exports due to the strong USD. Nevertheless, stronger expectations NFP print and softer trade data in Malaysia ahead may see the USDMYR trading above the 3.67 levels.

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