Market Update 26 November 2012

• EZ FinMin’s hold teleconference on Saturday to discuss Greece. The Ministers along with IMF and ECB representatives will meet on Monday again where they are expected to approve the next tranche of aid for Greece and a plan to relieve Greece's unsustainable debt burden. One report suggests deal is close at hand due to IMF agreeing to be more flexible on debt targets

• Risk sentiment has improved, and is taking a toll on core bond markets. However, negotiations on the US fiscal cliff and Greek debt are making risky assets vulnerable to another decline in risk appetite. Yields in Germany and France could rise further near term, but Fed buying should counter the bearish bias in the back end of the US next week.

• However, the risk rally occurred amid low volume as investors appear unwilling to commit to large positions given unresolved fiscal cliff concerns. There has been precious little progress on fiscal talks since John Boehner, the Republican speaker of the House of Representatives, declared opening talks with Obama “constructive” more than a week ago.

• USDMYR for a change actually opened lower at 3.0500 as risk appetite returned, but not sure for how long, but we are still likely stuck in the 3.0400-3.0800 trading range. Possible buy on dips today likely to give some support on downside, expecting low trading volumes and narrow trading range.

• All eyes will on the fiscal cliff talks in Washington to avoid a fiscal tightening induced recession. Recent risk rally and USD weakness highlight growing market hope that some form of fiscal cliff compromise is possible before year end although it is equally possible that the negotiations may prove more protracted than hope.