Trade: MYR 2s5s Steepener
3m Carry/Roll: -0.3 bp
-November last year's shock of 7bp flattening on BNM's change of stance on policy unlikely to re-occur with 9x12 KLIBOR almost fully pricing another 25bp hike by this year end which is fair, and given that overnight rates are only 25 bp away from cycle high of 3.50% in 2008, unlikely to see further shock in front-end.
-Headline inflation settling around 3.5% (target of 3-4%) also likely to keep BNM in watch and see mode, as headline hasn't sustained above 4% since GFC. Core will be expected to pick-up amid growth, but with it quite muted suggesting non-broad price pressures - could keep BNM pricing capped to 1 hike for this year.
-Pressure on further selloff in MYR rates likely to be skewed towards belly and further out in backdrop of global long-end selloff.
-MYR curve reasonably flat vs peers, unchanged since Dec, showing decent relative value in steepeners.
Visualized as index vs MYR 2s5s
Core still not suggesting that price pressures may not be too hot yet
MYR 2s5s curve history shows 10 bp decent level to put on steepeners