Central Banks Raid Toolboxes

Central bank actions dictated price action in EM Asia, even as markets digest the FOMC and BoJ rate announcements.

• INDIA: Yields lower, curve mixed. Markets await the results of the INR 290bn bond sale later. The RBI sold less than half the planned amount of INR 100bn at operation twist yesterday, a move that supported markets and saw yields retreat, the bank kept purchases unchanged at INR 100bn and once again concentrated on the 10-year sector, allocating 50.2%. The RBI said it will conduct another twist operation for INR 100bn next week.
• INDONESIA: Yields higher, curve steeper, tracking moves in USTs. Bonds have come under pressure again as global funds continue to sell, bringing net outflows for March to $1.4bn. Yesterday the BI kept rates on hold and pledged to maintain easy policy, but also said it intends to purchase bonds this year to support IDR.
• CHINA: The PBOC matched liquidity injections with maturities again, now the tenth day of matching maturities, liquidity was last added to the system on Feb 25. Repo rates have been subdued in reaction, the overnight repo rate is 13bps higher at 2.1319, but is still within yesterday's range, and the rate typically drops through the session, while the 7-day repo rate is 3bps lower at 2.1702%. Cash yields lower after a decent 50-year auction.
• SOUTH KOREA: Bonds initially lower but moved into positive territory after reports that South Korea is considering reducing issuance of shorter dated bonds, as well as considering an additional 30-year auction next week in the wake of 10/30-year yield inversion. Curve flattens.