PUBLIC BANK MONEY MARKET REVIEW FOR THE WEEK ENDING MAY 22, 2020

> MGS yields closed lower > Reopening of 10-year MGS was successfully auctioned off at 2.799% > Forthcoming tender: Reopening of 3-year GII

Yields of Malaysian Government Securities (MGS) closed lower as market’s expectation of further monetary policy easing increased after the Malaysian consumer price index (CPI) fell 2.9% year-on-year in the month of April exceeding market consensus of a 1.6% contraction.

Meanwhile, the reopening of 10-year MGS was successfully auctioned off at 2.799% with bids exceeding the auction size of Rm4.5bil by 1.73 times.

Bank Negara will be conducting the auction for the reopening of 3-year Government Investment Issue (GII) maturing May 15, 2023 with an expected auction size of Rm4.0bil.

The closing yields of benchmark MGS are as follows:

> Klibor : 1, 2 and 3-month dropped 1 basis point

> Bank Negara remained steadfast in borrowing short-term money

Bank Negara mopped up more liquidity from the market through its money tenders this week after Bank Negara allowed MGS and MGII to be used to meet SRR compliance effective May 16, 2020. The central bank borrowed Rm21.4bil against its term maturities of Rm10.2bil with financial institutions.

The money tenders were conducted as follows:

The 1, 2 and 3-month Kuala Lumpur Interbank Offered Rate (Klibor) dropped one basis point to 2.19%, 2.26% and 2.29% respectively this week. In the deposit market, overnight money traded between 1.95% and 2.00%. The 1-week

OIL PALM OUTPUT (in metric tonnes) to 1-month money was last traded between 2.04% and 2.19% in the interbank market.

> US initial jobless claims drops > Eurozone’s consumer price down

> Canada’s consumer price index down

US initial jobless claims fell by 249,000 to 2.438 million for the week ending May 9, falling from previous week’s revised level of 2.687 million. Market expectations were for a further decrease to 2.4 million.

Meanwhile, US continuing jobless claims rose to 25.073 million for the week ending May 9 from previous week’s revised level of 22.548 million. Market expectations were lower at 24.25 million.

Eurozone’s consumer price inflation slowed to 0.3% year-on-year (y-o-y) in April, recording its lowest level since 2016 compared to level of 0.7% in the previous month.

The preliminary figures had recorded a level of 0.4%. Additionally, seasonally adjusted current account surplus narrowed to €27.4bil

in March, marking its lowest level in three months and compared to a revised surplus

€37.8bil of in the previous month.

Elsewhere, Canada’s consumer price index fell 0.2% y-o-y in April, more than market forecast for a drop of 0.1%.

The local currency weakened this week as risk appetite waned amid an escalation in Us-china tension and the prospects of renewed turmoil in Hong Kong.

On the data front, Malaysia’s CPI fell by 2.9% y-o-y in April as compared to a 0.2% y-oy decrease in the preceding month.