Market Daily

Fixed Income Market Updates

European AT1

AT1 space closed the day around 0.125 point higher as risk appetite improved with asset managers buying into USD and EUR AT1 bonds. Deutsche Bank 4.789 Perpetual callable in April 2025 fell 0.125 point after a fixed income call as investors priced in a higher likelihood of non-call. We have been highlighting that Deutsche Bank is one of the few banks which have openly expressed that their call decision will be based strongly on economics. Hence, probably of non-call is heightened. We prefer to stick to banks which have a consistent track record of early call. 

ASIA INVESTMENT GRADE (IG)

China IG space traded flat to 1bp tighter on the day. Bonds of state-owned enterprises were sought after by asset managers while locals were buying bonds of asset management companies such as Huarong. Outside of China, Malaysian names such as Petronas and Khazanah Nasional saw buying in their long-dated bonds while Thai names had two-way flows on financials and corporates and closed slightly tighter in terms of spread. Bank Bukopin's new issue saw flippers in the morning, which brought the bond around 0.75 point lower before asset managers and hedge funds came in to buy the dip in the afternoon.     

ASIA HIGH YIELD (HY)

Prices stabilised in China HY property space. However, retail interest in short-dated bonds in that space waned. Longfor was downgraded by Fitch to BB with outlook on negative due to concern in the reduction in liquidity buffer due to weak sales and cash flow generation. We expect conditions to remain challenging for Chinese property developers. Distressed property names traded broadly unchanged with small buying seen in Agile and KWG. In India HY space, Biocon Biologics was the underperfomer and traded around 1 point lower after Johns Hopkins researchers sued a Biocon subsidiary for stealing a patented cancer-immunotherapy technology.  

Forex Market Updates

USD

The US Dollar gave back some of its gains after rallying to a nearly three-month high, most likely due to profit taking, while the US labour market remains resilient as mentioned earlier. The Fed is likely to discount the climb earlier in claims this month due to distortions from Hurricane Helene.

The Dollar Index should see some consolidation around 104.50 as markets look ahead to the upcoming election.

CAD

The Canadian Dollar edged down to an 11-week low against its U.S. counterpart on Thursday as investors bet the Bank of Canada would need to cut interest rates further to bolster a sluggish domestic economy. The Canadian central bank has cut its benchmark interest rate by 125 basis points since June to 3.75%. Its easing campaign included a half-percentage-point reduction on Wednesday, the first cut of that size in 15 years outside of the pandemic.

USDCAD would likely find some resistance at the 1.3870 level.

GBP

Sterling firmed against the dollar and the euro on Thursday, alongside a rise in British government bond yields, as investors assessed the outlook for the Bank of England's monetary policy. A Guardian report on Wednesday said that British finance minister Rachel Reeves will change how the government assesses the public finances to free up room for billions of pounds in extra capital spending upped the chances of the BoE keeping rates higher for longer.

Sterling looks to have found some support at 1.2900, with resistance at 1.3100.

XAU

Gold prices rose by nearly 1% on Thursday to trade near record highs as safe-haven demand from persistent geopolitical concerns bolstered prices, while fellow precious metal palladium saw a 9% surge on concerns of supply sanctions on top-producer Russia. Expectations of further monetary policy easing by central banks and gold's historical reputation as a hedge against economic and political uncertainty have boosted prices over 32% so far this year, hitting multiple record peaks along the way.

Bullion is likely to remain well-supported above 2600 moving forward.