MYR: USDMYR Reaches New Lows for Year

The AU–NZ 10-year yield differential stands at +30bps, its widest since October 2020.

• The move mirrors a similar widening in the AU–NZ 1-year forward 3-month swap (1Y3M) spread, which is now at its highest level since 2012.
• A simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past two years shows that the 10-year differential is around 3bps above fair value based on the regression model.
• The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.

Figure 1: AU-NZ: 10-Year Yield Differential Vs. FV

Source: Bloomberg Finance LP / MNI 

The USD/CNY fix printed at 7.0866, versus a BBG market consensus of 7.1197. The fixing is a touch above yesterday's outcome, while the fixing error is little changed at -331pips. USD/CNH is a little higher post the fixing, but at 7.1250 remains within recent ranges. Broader USD sentiment is mostly positive so far today, with USD/JPY probing recent highs near 154.50. The CNH/JPY cross is above 21.67, with upside focus to be on recent highs around 21.70. 

Money market rates still remain elevated as the PBOC has another day of significant liquidity injection.  The overnight money market rate spiked this morning to its highest level since July.  

• The PBOC issued CNY403.8n of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY117.5bn.
• Net liquidity injects CNY286.3bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.43%, from prior close of 1.49%.
• The China overnight interbank repo rate is at 1.53%, from the prior close of 1.45%.
• The China 7-day interbank repo rate is at 1.54%, from the prior close of 1.50%.