Bonds Pressured Post-FOMC

Bonds in the region pressured after a more hawkish than expected FOMC saw UST's sell off.

• INDIA: Yields higher in early trade. Market participants will focus on the final operation under the RBI's GSAP 1.0 today, the Bank will purchase INR 400bn of debt from the market, including INR 100bn of state debt. Eligible sovereign issues: 6.97% 2026, 6.79% 2027, 7.17% 2028, 7.59% 2029, 5.85% 2030 and 6.64% 2035. Markets will also pay attention to the RBI monthly bulletin that asserted the 10-year yield could fall further in the coming quarter. The bulletin notes evolving yield curve dynamics and scope for OMO's to shape the yield curve. They note the 5-year yield to be fairly valued and the 10-year yield converging to fair value in Q2. The bank's model indicates yields to adjust upwards by 1-23bps in the 2-3 years maturity, and decline by 39-56 bps in the 6-9 years segment.
• SOUTH KOREA: Futures gapped lower at the open in tandem with the move in UST's, but have recovered from early lows. BoK Senior Deputy Gov Lee said the BoK plans to take measures to stabilise markets if necessary, predicting volatility may rise due to changes in policy expectations over economic and inflation situations around the world, especially the US. Looking ahead the MOF will sell KRW 100bn of 10-year linkers tomorrow
• CHINA: Repo rates mixed today, the overnight rate slightly higher and the 7-day repo rate slightly higher – both are within recent ranges. The head of the NDRC spoke and said that commodity controls were working and would be continued, this combined with a data showing a slowdown in activity yesterday eased concerns the PBOC could tighten rates in the near term. Futures are flat having recovered from opening losses.
• INDONESIA: Yields higher across the curve as bonds sell-off alongside regional/global bond markets. Bank Indonesia are set to announce their latest monetary policy decision later today, virtually all analysts expect benchmark rates to remain on hold at a record low of 3.50%, Indonesia recently tightened mobility restrictions.