Rates & FX Market Weekly Fixed Income & Currency Research

Transcription

1 , Rates & FX Market Weekly Investors Sit Tight Ahead of US Mid-Terms Global Markets Week Ahead: US Markit services PMI and ISM services will be closely watched given the miss in manufacturing readings, with another disappointment likely to weigh on the US near-term outlook. The FOMC reconvenes later in the week, and while no headline policy change is expected, the statement is expected to remain supportive of further tightening into In any case, while the Fed keeps a close tab on recent market volatility and economic surprises, those are unlikely to derail its plans for the December meeting, where we expect another round of 25bps tightening to the FFR. Moving onto the US mid-term election, expect little market reactions if Democrats manage to wrestle control of the House while the Republicans hold the Senate. Any positive surprise on the side of Republicans may fuel bets of more tax cuts and regulatory reforms, which would likely bolster risk sentiment. On the other hand, a clean Democratic victory would deepen political risks in the US, likely resulting in a weaker USD and a surge in risk premiums. Moving on to the EU, services PMI prints due will likely dictate EUR trading sentiment in the week ahead. Other key economic data releases include EU retail sales and German trade balance, although we expect only fleeting impacts on market movements. The Italian budget stand-off remains a concern among European watchers, with both Italy and the EU refusing to budge at this juncture. Moving on, expect a relatively busy UK calendar, although the focus will likely be on the 3Q18 GDP print. As always, news around Brexit tends to be scrutinized in recent times, especially as officials vowed a deal by the end of the month. A reported compromised deal between the government of PM May and the EU side could provide a boost to the Cable in the week ahead, though investors will still look towards the details for any guidance. Next, we still expect global factors to be a key driver of the JPY in the week ahead, while key domestic data including household spending and cash earnings are not likely to significantly shift investors sentiment towards Japanese assets, nor materially influence BoJ in its upcoming policy meetings. Last but not least, RBA is likely to stand pat after the weaker-than-expected 3Q18 inflation readings. We expect RBA to remain relatively optimistic over the 2019 outlook, keeping the rate hike door open at this juncture. Chart 1: YTD Spot FX Returns DXY ADXY GBP EUR JPY AUD SGD KRW CNY CNH MYR THB IDR % Source: Bloomberg, RHBFIC *Spot returns are measured for the currency against USD Table 1: Positioning Views Rates FX US Neutral Neutral UK Neutral Mildly Bearish Eurozone Neutral Neutral Australia Neutral Neutral Japan Underweight Neutral Singapore Neutral Neutral China Mild Overweight Neutral Malaysia Neutral Neutral Thailand Neutral Neutral Indonesia Neutral Neutral Global Markets Sovereign Bond Auction Calendar Country Issuance Status Tenor Issue Size Coupon (%) Maturity 05 Nov Australia Reopening 28y AUD500m 3.00% 03/47 06 Nov US New Issue 3y USD37bn -- 11/21 06 Nov UK Reopening 10y % 10/28 07 Nov US New Issue 10y USD27bn -- 11/28 07 Nov Australia Reopening 10y AUD1bn 2.75% 11/28 07 Nov Germany Reopening 10y EUR3bn 0.25% 08/28 08 Nov US New Issue 30y USD19bn -- 11/48 08 Nov Japan Reopening -- JPY400bn Auction for Enhanced Liquidity Rates & FX Team fixed.income.research@rhbgroup.com Source: RHBFIC, Various Ministries of Finance See important disclosures at the end of this report 1

2 AxJ Markets Week Ahead: Rates & FX Market Weekly Chinese authorities continue to face tough challenges in the midst of a trade war with the US, signs of further economic slowdown, and its massive debt burden. Investors will continue to eye movements in the CNY and CNH despite the recent pullback in USD crosses, as another bout of USD strength could easily push them beyond the 7 handle. Caixin services PMI, foreign reserves, trade and CPI data due in the week ahead will likely keep China watchers busy. Moving on, with a relatively light economic calendar in Singapore and Thailand for the week ahead (PMI and consumer confidence respectively), expect global flows and regional sentiment to influence asset movements in the week ahead. Over in Malaysia, the recent budget eyed a fiscal deficit of 3.7% this year and 3.4% in 2019, and indicative of the government s commitment towards fiscal consolidation. Gross and net MGS/GII supply is projected to be MYR120bn and MYR53bn respectively in Although the gross MGS/GII supply is relatively higher next year but net amount at MYR53bn is still manageable, with onshore real money demand is expected to remain supportive taking cue from YTD healthy bid to cover trends and BNM s still accommodative monetary policy stance. Inflation is forecasted at % in 2018 and % in We expect OPR to remain unchanged at 3.25% in 2018 and Last but not least, Indonesian 3Q18 GDP is likely to stay within recent ranges despite the aggressive tightening by BI. Current account balance and foreign reserves print will also be closely watched, with any deterioration likely to compound on its external woes. AxJ Markets Sovereign Bond Auction Calendar Country Issuance Status Tenor Issue Size Coupon (%) Maturity 06 Nov Indonesia Reopening 5y 8.125% 05/24 06 Nov Indonesia Reopening 10y IDR10-20trn including % 05/29 06 Nov Indonesia Reopening 15y SPN issuances 6.625% 05/33 06 Nov Indonesia Reopening 20y 7.50% 05/38 07 Nov China Reopening 3y CNY35bn 3.17% 10/21 07 Nov China Reopening 7y CNY35bn 3.60% 09/25 Source: RHBFIC, Various Ministries of Finance See important disclosures at the end of this report 2

3 Rates & FX Trade Ideas Rates Trade Ideas Initiated Closed Entry Levels Current Target / Stop Loss Yield Change Since Initiation (bps) Tactical Long 10y UST vs Bunds 26/02/18 25/04/ / Stop Out Note: Only outstanding positions and positions expired or closed over a rolling one week are reflected in the table; all positions unhedged *Figures denoted in bps unless otherwise stated. Status FX Trade Ideas Initiated Closed Entry Levels Current Target / Stop Loss Performance Since Initiation (%) Long AUDMYR 27/02/18 20/03/ / % Stop Out Short USDTHB 02/05/18 14/05/ / % Stop Loss Note: Only outstanding positions and positions expired or closed over a rolling one week are reflected in the table; all positions unhedged. Status 3

4 Economic Review of Past Week 29 Oct Monday 30 Oct Tuesday 31 Oct Wednesday 01 Nov Thursday 02 Nov Friday US Personal Income ; Personal Spending ; PCE Core = Consumer Confidence ADP Markit Mfg PMI ; ISM Mfg Trade Balance ; NFP ; Unemployment Rate =; Factory Orders ; Durable Goods UK Mfg PMI ; BoE Bank Rate = Eurozone GDP CPI ; CPI Core ; Unemployment Rate = Markit Mfg PMI Japan Retail Sales Unemployment Rate IP ; BoJ (unchanged) Nikkei Mfg PMI Australia Building Approvals CPI ; CPI Trimmed Mean ; CPI Weighted Median ; Private Credit AiG Mfg PMI ; Trade Balance Retail Sales Singapore PMI China Mfg PMI ; Services PMI Caixin Mfg PMI Malaysia Nikkei Mfg PMI Thailand Trade Balance ; Exports ; Imports ; CA Balance Nikkei Mfg PMI ; CPI ; Core CPI Foreign Reserves Indonesia Nikkei PMI ; CPI ; Core CPI denotes higher; denotes lower; pink denotes poor economic data; green denotes improving economic data. 4

5 Weekly Sovereign Rates and FX Changes All following data cut off at 12PM GMT Rates & FX Market Weekly Country Closing Yield (%) 2y Yield Change (bps) 3m Avg Yield (%) Closing Yield (%) Yield Change (bps) 10y 3m Avg Yield (%) Current vs 3m Avg (bps) 2/10y Spread (bps) US Currency ** FX Rate (per USD) Last Traded Price Daily Change (%) DXY ADXY UK GBP Germany France Spain EUR Italy Portugal Japan JPY Australia AUD Singapore SGD South Korea* KRW 1, China* CNY China (Offshore)* CNH Malaysia* MYR SGD/MYR Thailand THB Indonesia* IDR 15, *3y **Against USD unless otherwise mentioned; daily change (%) reflects overnight changes in the pair denoted in market convention. Sovereign 5y CDS Country Last Close Weekly 52-wk High 52-wk Low Monetary Policy Meeting Schedule Country Key Policy Rate (%) Next Policy average (bps) (bps) US Nov 18, Thursday US UK Dec 18, Thursday UK EU 0 13 Dec 18, Thursday Germany Japan Dec 18, Thursday Spain Australia Nov 18, Tuesday Japan Singapore - 11 Apr 19, Thursday* Australia China China Malaysia Nov 18, Thursday Malaysia Thailand Nov 18, Wednesday Thailand Indonesia Nov 18, Thursday Indonesia *Preliminary 5

6 Week Ahead Economic Calendar Rates & FX Market Weekly Country Event Period Survey Prior 05 Nov AU AiG Perf of Services Index Oct Nov AU Melbourne Institute Inflation YoY Oct % 05 Nov SI Nikkei Singapore PMI Oct Nov CH Caixin China PMI Services Oct Nov TH Consumer Confidence Oct Nov MA Exports YoY Sep % 05 Nov MA Imports YoY Sep % 05 Nov MA Trade Balance MYR Sep b 05 Nov UK Markit/CIPS UK Services PMI Oct Nov US Markit US Services PMI Oct F Nov US ISM Non-Manufacturing Index Oct Nov ID GDP YoY 3Q 5.18% 5.27% 05 Nov ID Consumer Confidence Index Oct Nov CH BoP Current Account Balance 3Q P -- $5.3b 06 Nov JN Household Spending YoY Sep 1.50% 2.80% 06 Nov JN Nikkei Japan PMI Services Oct Nov AU RBA Cash Rate Target Nov % 1.50% 06 Nov GE Markit Germany Services PMI Oct F Nov EC Markit Eurozone Services PMI Oct F Nov EC PPI YoY Sep % 07 Nov JN Labor Cash Earnings YoY Sep 0.90% 0.90% 07 Nov JN Real Cash Earnings YoY Sep % 07 Nov GE Industrial Production WDA YoY Sep % 07 Nov MA Foreign Reserves Oct $102.8b 07 Nov EC Retail Sales YoY Sep % 07 Nov CH Foreign Reserves Oct -- $ b 07 Nov ID Foreign Reserves Oct -- $114.85b 08 Nov JN Core Machine Orders YoY Sep 8.20% 12.60% 08 Nov JN BoP Current Account Balance Sep b b 08 Nov MA BNM Overnight Policy Rate Nov % 08 Nov GE Trade Balance Sep b 08 Nov GE Current Account Balance Sep b 08 Nov US Initial Jobless Claims Nov Nov US Continuing Claims Oct Nov CH Trade Balance Oct -- $31.69b 08 Nov CH Imports YoY Oct % 08 Nov CH Exports YoY Oct % 08 Nov JN Eco Watchers Survey Current SA Oct Nov JN Eco Watchers Survey Outlook SA Oct Nov US FOMC Rate Decision (Upper Bound) Nov % 2.25% 09 Nov AU RBA Statement on Monetary Policy 09 Nov AU Home Loans MoM Sep % 09 Nov AU Investment Lending Sep % 09 Nov CH PPI YoY Oct % 09 Nov CH CPI YoY Oct % 09 Nov MA Industrial Production YoY Sep % 09 Nov TH Foreign Reserves Nov

7 09 Nov UK Trade Balance Sep Nov UK Industrial Production YoY Sep 0.50% 1.30% 09 Nov UK Manufacturing Production YoY Sep 0.40% 1.30% 09 Nov UK GDP YoY 3Q P 1.50% 1.20% 09 Nov US PPI Final Demand YoY Oct 2.70% 2.60% 09 Nov US U. of Mich. Sentiment Nov P Nov ID BoP Current Account Balance 3Q -- -$8028m 7

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