Macroeconomics

• It's not a glamour day that one has hoped for after all. Data flow was less than encouraging accross the globe, with China being the only exception (mind you, it's strong statistics were also distorted by the exceptionally low base last year on fundamental and seasonal reasons). Newsflow was negative as well with Nobel laurete Spence saying the US recovery will take several years. Against this backdrop, equities moved sideways and dollar index lost a little, and commodities were mixed. There was even mild selling on UST.
• On the data front, global confidence slipped for the 2nd month in a row, hit by concern over Greek's deficit woes which may derail the world recovery. US wholesale inventory surprisingly fell, industrial production declined in the UK, Japan 4Q09 GDP grew a tad slower than the preliminary estimate, and the Australian added much fewer than expected jobs. All these suggest sustained recovery doesn't come easy.
• On policy front, RBNZ left its official cash rate unchanged at 2.50% as expected this morning and maintained its stance that its OCR won't be raised before mid-year. BOK also left rates unchanged at record low of 2.0% in a bid to spur investment. While BOT also stayed pat, its rhetoric is becoming more hawkish, saying high possibility of "adjusting rates to a more normal level in the period ahead".

Forex

• USD was mixed in light trading on lack of major US economic reports. Expect USD to trade sideways as investors await today's initial jobless claim report.
• EUR tipped lower against the greenback as Geman trade surplus narrowed more than expected. We maintain our near term bearish stance on the EUR.
• GBP came under further pressure following worse than expected UK industrial and manufacturing production figures. GBP is likely to retain its downward tendencies on political and public finance concerns.
• JPY advanced against EUR amid speculation that Japanese exporters bought the currency before the end of the fiscal year. Expect Yen to stay bid.
• AUD gave back its earlier gains as US stockmarket volatility sent investors out of higher risk assets and into safer plays. Expect AUD to rise against USD following its positive employment data.
• MYR closed at a new 18-month high against USD as rosy exports data from China pared demand for the greenback. Expect MYR to stay bid as the market is upbeat about the prospect of further rate increases.

Fixed Income

• UST traded lower on Wednesday as stocks advanced higher. Both yields of 2s and 10s inched 3bps and 2bps respectively. Meanwhile yesterday's auction of $21bn 10-year notes attracted strong demand, registering bid-to-cover of 3.45x, up from 2.67x achieved in previous auction held in February. Strong take-up at yesterday's acution indicated that there is still demand for safe-haven UST. With 2 auctions recently completed, the US government will sell another $13bn of 30-year notes later today, ending this week's $74bn debt sale.
• On the local market, MGS yields closed unchanged as players for the sale of upcoming RM3.5bn 7.5-year MGS come Friday. When-Issued (WI) trading for the new 7.5-year MGS closed at 4.00%, up 1bp from Tuesday's level. Trading volume for the benchmark govvies came in at RM15m, RM345m and RM60m respectively for the 3s, 5s and 10s. Expect players to be tracking upcoming industrial production data out later today. Improved production data may again pave the way for further rate normalization amid signs of economic recovery, which we view as positive for the local currency. A stronger ringgit may again serve as a catalyst in attracting offshore players to accumulate on higher yielding RM-denominated assets.