PUBLIC BANK MONEY MARKET REVIEW FOR THE WEEK ENDING NOV 30 2018
>MGS yield closed higher >Reopening of 5-year MGS issued at 3.874% >Forthcoming Tender: Reopening of 20-year GII
The Malaysian Government Securities (MGS) yield curve flattened as yields of longer dated bonds tracked global yields lower amid dovish comments by the Federal Reserve Chair Jerome Powell that the current US interest rate was just below neutral rate while yields of shorter dated bonds climbed in tandem with a weaker Ringgit. The reopening of MGS maturing April 20, 2023 was successfully auctioned off at 3.874% with bids exceeding the auction size of RM3.5bil by 2.32 times. Bank Negara will be announcing the reopening of the 20-year Government Investment Issue (GII) maturing August 2037 with an expected auction size of RM3bil.
MONEY MARKET >Klibor: Rates remained unchanged >Bank Negara remained steadfast in borrowing short-term money
Bank Negara mopped up less liquidity from the market through its money tenders last week. The central bank borrowed RM12.5bil against its term maturities of RM20.8bil and conducted reverse repo tender with financial institutions.
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 1-week to 1-month money was last traded between 3.32% and 3.43%. Meanwhile, 2 and 3-month Negotiable Instruments of Deposits last transacted between 3.63% and 3.65% in the interbank market.
>Dovish Tilt From Powell >German Consumer Confidence Dips >Japan’s Retail Trade Climbs At Fastest Pace In 10-Months
In the latest Fed meeting, Fed Chair Jerome Powell said that the Fed funds rate is ‘just below’ the neutral rate. Considering the comments from October where he said that the Fed funds rate was a ‘long way’ from the neutral rate, this was perceived quite dovishly by markets. The implication is that if rates are just below neutral, the Fed won’t raise them much further from here. Consequently, the dollar fell sharply as investors priced out rate increases in 2019; markets now expect the Fed to hike rates central a single time next year, versus the three 25 basis points hikes penciled in by the bank itself.
Germany’s confidence indicators are down in November, raising concerns about the strength of its economy. GfK consumer climate dropped to 10.4 points, its weakest level since May 2017. Earlier in the week, Ifo Business Climate dropped to 102.3, missing the forecast of 102.0 points. Elsewhere, Japan’s retail trade climbed 3.5% on an annual basis in October, rising at its quickest pace in 10-months and more than market expectations for a rise of 2.7%. In the prior month, retail trade had advanced 2.1%.
The local currency rose from near a 1-year low against the greenback after seemingly dovish comments from Fed Chairman Jerome Powell weighed on the dollar. Emerging markets also saw some relief on the hopes of a cooling of trade tensions between China and the US when the 2 leaders meet at the G20 summit.