Broad Risk On Tone Pressures Most Bonds In The Region

The start of the week has been dominated by broader focus on the prospects of a sizeable fiscal support package in the U.S., with Treasury Secretary Yellen and President Biden continuing to push home the need for notable assistance for the economy. This has spurred risk sentiment and weighed on bonds worldwide.

• China: Bond futures were lower as equity markets posted decent gains. The cash space saw yields rise with some bear flattening evident. The PBOC injected CNY 10bn via OMOs, a still small injection by historical standards but the PBOC seem to be comfortable with liquidity in the system heading into LNY. The O/N repo rate did rise, amid speculation that liquidity could begin to dry up heading into LNY. The rate last 1.9047%, up just shy of 40bps, but way below highs of January.
• South Korea: Fixed income space in South Korea was under some pressure amid robust risk appetite in Asia. The uncertainty around additional issuance to finance an additional budget which features cash handouts also continues to weigh, this concern was evident at the 3-year auction. The yield offered a small yield concession but saw a smaller coverage ratio and less aggressive bids.
• India: India bonds gained to start the week and bucked the regional trend in doing so, recovering from the sharp sell off on Friday. The RBI announced it would increase bond purchases by INR 500bn, the bank also announced twist purchase operations to flatten the yield curve.
• Indonesia: Yields rose across the curve in Indonesia, the sell off exacerbated after deputy FinMin Nazara outlined increased spending plans to support the economy and said the economy is expected to expand between 4.5% and 5.5%. Sales were slowed as the government announced extension of pandemic containment measures until Feb 22.