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Chart 1: MGS Movement

MYR Government Bonds:• The local Malaysian government bonds and sukuks closed supported on Tuesday. The 10y MGS benchmark held steady to close at 3.56% yesterday. BNM announced several measures to assist individuals, SMEs and corporations from impact of Covid 19 outbreak. Measures announced include a 6 months moratorium on loan payments for Individuals and SMEs and also credit restructuring for corporation which is expected to ease financial burden of impacted businesses. BNM has also reaffirmed the market on the sufficient liquidity in the domestic financial system and will continue to support daily ringgit liquidity further through various tools. On a related note, Bank of Thailand’s policy meeting today will be closely watched too. Yesterday, the Thai government announced a second wave of economic stimulus worth 117bn Baht or $USD3.6bn to fight the virus impact as infection cases surged higher. Market player also anticipates the US policymakers to pass a USD2 trillion economic stimulus package to boost growth. On the local macro front, all eyes on the Malaysia’s CPI data due today. Inflation is expected to remain subdued amid recent sharp decline in oil price.

• Daily trading activities in the local government bond space saw trading volume matching Monday’s levels with c.MYR2.8bn transacted. Trades were skewed towards the shorter tenure of MGS and GII led by the MGS ‘7/21 and GII ‘8/20 with MYR567m and MYR480m in traded volume, yield closed around 3.02% and 2.83% level. The 3-year MGS 3/23 was seen traded tighter this morning, taken at 3.19%-3.20% level.

MYR Corporate Bonds/Sukuk• Over on the corporate bonds space, trades pick up higher to MYR715m in traded volume on closing yesterday. The longer tenured bonds/sukuk seen among most actively traded. Notably saw Sunway Perpetual traded with combined amount of MYR200m with yield closed tighter at 4.40% level.

BNM provides measures to individuals and businesses impacted by Covid 19, all eyes on US stimulus packageFixed Income Strategy

Source: Bloomberg, BNM, RHBFIC

Chart 2: USDMYR and 10Y MGS

Source: Bloomberg, BNM, RHBFIC

Source: BPAM, BNM, RHBFIC *MYR-denominated bonds

Table 1: Index Movements

Table 2 : Daily Trades – Government Bonds

Table 3 : Daily Trades – Corporate Bonds/ Sukuk

Table 4: Rating Actions

Source: RAM, MARC, RHBFIC

UST Market:

• US Treasuries yield ended higher on Tuesday as US equities staged a strong rebound amid renewed optimism from unlimited quantitative easing measures from the US Federal Reserve. Market now awaits for USD2trn stimulus package expected to be announced by US policymakers to help allay concerns over Covid 19 Pandemic. U.S. Senators are negotiating on the final points for the estimated USD2trn stimulus package. 10-year UST yields ended higher to close at 0.86% versus Monday’s closing level of 0.79%.

•On the macro front, U.S. services and manufacturing sectors contracted sharply in March, as the coronavirus outbreak weighs on economic growth. U.S. services purchasing managers index (PMI) declined to a record low of 39.1 for the month, falling from a reading of 49.4 in February. This was well below the level of 42.0 expected by the Bloomberg consensus data. Meanwhile manufacturing PMI fell to 49.2 in March from 50.7 in February, reaching the lowest level since 2009. Consensus economists expected the preliminary monthly PMI to come in at 43.5. Both readings are now in contraction mode with readings below 50. Upcoming auction this week include USD41bn 5- year notes sale today followed by another USD32bn 7-year note sale on Thursday.

•We opine passing of the US planned stimulus together with recent coordinated efforts from global central banks to help shore up consumer sentiment and investors' confidence as measures is required given the increased downside risk to growth from the Covid 19 pandemic.

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Chart 3: UST Curves

Source: Bloomberg, RHBFIC