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China Futures Lower For Second Day; Indonesia Boosted By Strong Auction

  • INDIA: Yields lower in early trade. Bonds held steady yesterday, entering a holding period ahead of the RBI's rate announcement on Friday. The RBI is expected to maintain policy settings and acknowledge headwinds to growth, while expressing a preference to wait for more data points on the inflation. The RBI has maintained that higher inflation is transitory but inflation prints remain stubbornly higher. Kotak Asset Management noted that Friday could see "some steps towards normalization of liquidity via increased tenor or quantum of VRRR (variable rate reverse repo) – something which bond markets seem to be anticipating". Equity markets seem to be anticipating a dovish outlook from the RBI, indexes closed at record highs yesterday.
  • SOUTH KOREA: Futures are higher again today, rallying for a second day, but are within the well defined range seen since mid-July. Coronavirus cases jumped again, after hovering in the 1,200's for two days there were 1,725 new cases in the past 24 hours. The minutes from the July BoK meeting were widely seen as hawkish, though there were indications of concern around the fourth wave of coronavirus, several banks have bought forward rate hike calls to August. The BoK sold KRW 2.3tn of 2-Year bonds at a yield of 1.27%, the sale was covered 1.39x.
  • CHINA: The PBOC matched injections with maturities today, repo rates are within recent ranges. The overnight rate is up 14bps at 1.6971% after plunging into the close yesterday, 7-day repo rate up 1.6bps at 1.9667%. Futures are lower, on track for a second straight decline against a backdrop of an extended rally. Chinese equity markets are higher today after finishing flat yesterday. Data earlier showed China July Caixin services PMI rose to 54.9 from 50.3 in previous month. The positive survey helps offset a slowdown in the official and Caixin manufacturing PMI releases.
  • INDONESIA: Yields lower across the curve, on track for a fifth day of declines. Yesterday's auction was strong, the government sold IDR 13.5tn against a target of IDR 12tn and received the strongest bids of 2021 so far. Indonesian Foreign Min Marsudi travelled to DC to meet with her U.S. counterpart Blinken. Both chief diplomats launched a "strategic dialogue" on issues including freedom of navigation in the South China Sea. Indonesian Q2 GDP report will be published on Thursday. The Indonesian economy is expected to have grown 6.72% Y/Y, according to Bloomberg consensus forecast.

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