China Front End Yields Continue To Grind Lower

A subdued day across bond markets despite Treasury moves overnight

CHINA

• Front end continues to grind lower following the cut in reverse repo rates earlier in the week. The magnitude of the cut was less significant than the timing post completion of the plenum is. It is likely to signal the start of further policy expansion to support an economy whose growth outlook has stalled. Monday’s rate move was also designed to strengthen the role of the seven-day repo rate as the PBOC’s de facto benchmark, something the PBOC Governor hinted at recently.

2yr 1.53% (-1bp) 5yr 1.89% (-1bp) 10yr 2.28% 30yr 2.44%

INDONESIA

• Domestic bonds saw modest steepening today ahead of a busy auction schedule
• Indonesia is to sell bonds across 3mth, 2029, 2043, 2038, 2034, 2054 maturities representing the first test since news that incoming Indonesian President Prabowo Subianto is tapping his nephew for a top job at the finance ministry which has some questioning whether the Southeast Asia’s largest economy is shifting away from its fiscal discipline.

2yr 6.6% (+0.5bp) 5yr 6.854% (+0.5bp) 10yr 6.977% (+1.5bp) 30yr 7.065%

INDIA

• Bond market quiet ahead of the release of the budget
• Modi’s coalition government’s first budget is expected to see more of the same, with limited surprises, continuing its focus on curbing the fiscal deficit

3yr 6.88% 5yr 6.931% 10yr 6.963% 30yr 7.029%