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Bonds Supported On Coronavirus Concerns & OMO Prospects

ASIA RATES
  • INDIA: Yields lower in early trade. Bonds are expected to be supported today ahead of the RBI's latest GSAP operation later in the session. The RBI will purchase INR 200bn from 8.24% 2027, 7.17% 2028, 7.59% 2029, 7.88% 2030 and 7.57% 2033 lines. Elsewhere RBI Governor Das gave an interview to the Business Standard and said the Central Bank is very watchful of the inflation scenario and that should moderate in Q3 if the fiscal year. Das noted growth was the main challenge now, and that higher inflation was transitory.
  • SOUTH KOREA: Bonds in South Korea pressured higher again as risk assets take a hit after the health ministry announced a record high number of COVID-19 cases, with cases staying above 1200 for two consecutive days for the first time since December. Some reports from Yonhap that South Korea is considering raising social distancing rules in South Korea, as reported previously, while adding that health authorities expect virus cases to continue rising for one-week.
  • CHINA: Repo rates drop, futures higher. The market is still latching on to reports from yesterday that the RRR could be cut after reports from the State Council meeting. There is growing speculation that the cut will be targeted rather than a cut to the broader RRR, a story just run in the China Securities Journal posited that the cut is more likely to be for SME. The piece asserts that the cut could come at the end of Q3 if upward pressure on CPI eases.
  • INDONESIA: Yields higher across the curve. Indonesia broadened its Covid-19 restrictions to dozens of localities across the country on Wednesday, at a time when its healthcare system operates beyond capacity. The number of fatalities from Covid-19 exceeded 1,000 on Wednesday, for the first time on record. Elsewhere consumer confidence printed 107.4 in June from 104.4 in May and FinMin Indrawati told BBG that the budget deficit will remain elevated next year, owing to the current resurgence of Covid-19. She estimated that the deficit will reach 4.7%-4.8% of GDP in 2022, which is close to the upper end of the gov't's projection (4.50%-4.85%).
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