PUBLIC BANK MONEY MARKET REVIEW FOR THE WEEK ENDING SEPT 7 2018

>MGS yields closed higher

>Forthcoming Tender: Reopening of 30-year GII

Yields of Malaysian Government Securities (MGS) closed higher as fear of contagious impact of emerging market rout across Turkey, South Africa and Argentina spreading to Asia and triggered a sell-off in Malaysian government bonds.

During the week, Bank Negara announced the reopening of the 30-year GII maturing May 2047, with an auction size of RM2bil.

The closing yields of benchmark MGS are as follows:

MONEY MARKET

>OPR unchanged at 3.25%

>Klibor: Rates remained unchanged

>Bank Negara remained steadfast in borrowing short-term money

Bank Negara maintained its Overnight Policy Rate unchanged at 3.25% at its monetary policy meeting last Wednesday. Last week Bank Negara continued to mop up more liquidity from the market through money tenders. The central bank borrowed RM14.9bil against its term maturities of RM12.5bil and reverse repo amounting to RM320mil with financial institutions.

The money and repo tenders were conducted as follows:

Kuala Lumpur Interbank Offered Rate (Klibor) remained unchanged across all tenors.

In the deposit market, overnight money traded between 3.20% and 3.25%.

The one week to one month money last traded between 3.30% and 3.43%.

Meanwhile, six months Negotiable Instruments of Deposits last transacted at 3.83% while one month Bankers

Acceptances was last traded at 3.60% in the interbank market.

>US initial jobless claims fall

>Australia’s trade surplus narrows

>Bank of Canada keeps benchmark interest rate unchanged

US initial jobless claims fell to its lowest level since December 1969 by 10,000 to 203,000 for the week ending Sept 1. Market expectations were for an increase to 214,000. US continuing jobless claims decreased by 3,000 to 1.707 million for the week ending Aug 25 as compared to the revised level of 1.710 million the previous week.

Australia’s July trade surplus narrowed to A$1.551bil, following a revised level of A$1.937bil in the prior month.

It was driven by decrease in exports while imports showed little change. Market participants had anticipated the nation to record a trade surplus of A$1.45bil.

Elsewhere, Bank of China left its key interest rate unchanged at 1.50% in its September monetary policy meeting. It was in line with market expectations, amid looming risks over Nafta and inflation outlook. However, the bank signalled a possible rate hike at its next meeting in October.

Bank Negara left the overnight policy rate unchanged at 3.25%, as widely expected.

Meanwhile, Malaysia’s foreign reserves rose to US$104.4bil as of Aug 30, rising from US$104.2bil as of Aug 15. The latest reserves are sufficient to finance 7.5 months of retained imports and is 0.9 times short-term external debt.