MALAYSIA: Industrial Production Up Again, Rate Outlook Extended

ACGBs (YM +1.5 & XM +2.0) are modestly stronger despite today’s much stronger-than-expected home loan data.

• The recovery in home lending began in Q2 after the RBA began easing in February and the 75bp to August appears to have contributed to the sharp rise.
• Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +29bps. At this level, investors may be tempted to position for a narrowing in the differential, as it sits near the top of its well-defined ±30bps trading range (see chart).
• However, such trades carry meaningful risk ahead of tomorrow’s October employment data. The unemployment rate rose 0.2pp to 4.5% in September.
• The unemployment rate is widely expected to normalise somewhat at 4.4% but there are a few economists who expect it to stay at 4.5% or fall back to 4.3%.
• Last month's weak employment data triggered a solid ACGB rally, but those gains were more than fully reversed after the much hotter-than-expected Q3 CPI report.
• RBA-dated OIS pricing is showing a 25bp rate cut in December at a 9% probability, with a cumulative 16bps of easing priced by mid-2026.
• The AOFM plans to sell A$800mn of the 1.75% 21 November 2032 bond on Friday.

Bloomberg Finance LP

NZGBs closed 1bp richer across benchmarks.

• On a relative basis, NZGBs have underperformed the $-bloc, with the NZ-US and NZ-AU 10-year yield differentials both 3bps wider at +2bps and -27bps, respectively.
• Nevertheless, the NZ-AU 10-year yield differential remains close to its lowest level since 2020. At this level, investors could be lured into taking differential reversal trades. That said, such trades carry meaningful risk ahead of tomorrow’s October employment data.  (see chart)
• Swap rates closed flat to 2bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed little changed across meetings. 28bps of easing is priced for November, with a cumulative 38bps by February 2026.
• The local calendar will see Card Spending data tomorrow.
• Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$150mn of the 4.25% May-34 bond and NZ$50mn of the 5.00% May-54 bond.
• The NZ Treasury has today announced the appointment of the following joint lead managers to form the panel for the syndicated tap of the 15 May 2036 nominal bond: ANZ Bank; J.P. Morgan; UBS; and Westpac.
• As previously announced, the Treasury expects to launch this transaction before calendar year-end 2025, subject to market conditions. As per usual practice, if the syndication occurs, the scheduled bond tender for that week will be cancelled.

Bloomberg Finance LP

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