The Thomson Reuters BPAM All Bond Index registered a gain of 0.17 per cent to close at 158.787 points from 158.517 points last Friday.
The index gain was partly contributed by the heavy interest emerged in corporate bond/sukuk this week, especially for the government-guaranteed (GG) segment, which had registered a weekly trade volume of RM1.475 billion compared to RM827 million last week.
The strong interest in GG segments had also driven the GG curves bull-flattened by 1-5bps from three-year onwards for the week.
On the other hand, trading momentum in government segment slowed down significantly compared to last week due to lack of fresh leads.
On Wednesday, the Statistics Department announced the Consumer Price Index (CPI) for June 2018, which had registered the lowest growth in 40 months at 0.8 per cent on year-on-year basis.
The lower CPI growth in June 2018 was attributed to the abolishment of the GST to zero rated starting June 1, discounted price by retailers in conjunction with festivities and the implementation of Price Control Scheme for 22 selected items in conjunction with Hari Raya Aidilfitri.
Among the main groups that recorded decreases were index for Miscellaneous Goods & Services (3.1 per cent), Communication (three per cent), Recreation & Culture Services (2.9 per cent), Clothing & Footwear (2.6 per cent), Furnishings, Household Equipment & Routine Household Maintenance (2.4 per cent), and Food & Non-Alcoholic Beverages (one per cent).
On month-on-month basis, CPI decreased by 1.2 per cent as a result of the decrease in all main groups.
On the international front, Federal Reserve chairman Jerome Powell on Tuesday emphasised that more rate hikes are right path “for now” despite uncertainties arising from the trade wars between US and China as the job market was expected to improve further and the inflation rate was getting closer to the two per cent target.
Government bonds/sukuk remained the top 10 most actively traded bonds this week despite that the total trade volume for government segment was decreased to RM8.734 million from RM12.259 billion last week.
The recently reopened 10-year benchmark GII maturing on October 31, 2028 continued to top the list with RM1.3 billion changed hands.
On July 18, 2018, RAM Ratings has downgraded TF Varlik Kiralama AS’s (TF Varlik) RM3.0 billion Sukuk Murabahah MTN Programme (2014/2034) and KT Kira Sertifikalari Varlik Kiralama AS’s (KT Kira) RM2 billion Islamic MTN Programme (2015/2025) to A1/Stable and A1(s)/Stable from AA3/Negative and AA3(s)/Negative respectively.
The rating downgrade was triggered by RAM Ratings’ downgrade of Turkey’s sovereign ratings to gBB2(pi)/Stable/gNP(pi) from gBBB3(pi)/Negative/gP3(pi), due to an erosion of the country’s fiscal discipline, a rising likelihood of contingent liabilities crystallising and higher economic volatility.
Based on RAM Ratings methodology, the downgrade of Turkey’s rating to the gBB category necessitates a one-notch ‘sovereign weight’, which then lowers the bank’s long-term rating.