Macroeconomics

• US markets ended little changed and moves were small across, stocks and treasuries gained a little, commodity down a tad and dollar index was up a small 0.2%.
• Data was light and negative once again. Both NFIB small biz optimism and IBD/TIPP economic optimism unexpectedly dwindled (the later to a 1-year low), signaling pessimism among both businesses and consumers on uncertainties over economic recovery. Fed Evans said low interest rates are likely needed "for some time" in view of high unemployment and below target inflation.
• Over in the UK, the surprised widening in trade deficit dragged by lower exports seemed to suggest that persistent GBP weakness hadn't given any boost to exports, hence further undermining recovery traction in the UK as domestic demand remained weak.
• Asian data turned out mixed and offered little cheer. With the exception of a rise in Japan leading indicator and a small uptick in Westpac consumer confidence, the rest of the indicators out of Japan and Australia appeared to suggest full swing recovery has yet to kick in.

Forex

• USD strengthened against EUR and GBP as credit ratings agencies sounded warnings on Europe. Expect USD to continue benefit from safe-haven buying.
• EUR remained the weaker currency across most majors except for the GBP, DKK, SEK and NOK, as uncertainty in the Eurozone once again weighs heavily on investors. We maintain our near term bearish stance on the EUR.
• GBP fell to near 10-month low on waning housing recovery and deficit concern voiced by Fitch. GBP is likely to retain its downward tendencies on political and public finance concerns.
• JPY appreciated against USD on speculation BOJ will ease monetary policy further. Expect JPY to stay bid as risk aversion is back on the table.
• AUD climbed just before the text of Lowe's speech commented the Australian economy is likely to expand faster. Expect AUD to gain on speculation RBA will increase interest rates further.
• MYR closed lower against USD and JPY as the market was not very active with players reluctant to take heavy position. The MYR however gained against all other G10 currencies, appreciating the most against the GBP and was mixed against its regional peers. Expect MYR to extend its gradual appreciation to trade within a range of 3.32 - 3.35 today.

Fixed Income

• UST recovered higher following strong demand registered at yesterday's $40bn 3-year auction. Bid-to-cover was at a sturdy 3.13x versus previous auction levels of 2.83x. The 3-year notes drew an average yield of 1.437% . Meanwhile UST yield curve also trended lower responding towards Fed's Evan view on low interest rates needed as high unemployment lingers. Yields for both 2s and 10s shed about 2bps each respectively.
• Back home, MGS yields were lifted higher on mid profit taking following recent gains in local govvies. Yields for 3s, 5s and 10s notched 5bps and 1bp each respectively. Trading volume was concentrated at the 5s and 10s; both reported trades of RM477m and RM311m respectively. Expect bargain hunting to emerge with the upcoming RM3.5bn 7.5-years auction on 12 March, which will serve as the 7-year benchmark. We expect the influx of new 7-year benchmark MGS to provide price guidance, helping to allign bond prices for papers within the 7-year maturity horizon.