China Liquidity Concerns Creep In

INDIA: Yields higher in early trade. CPI rose 6.30% against expectations of a 5.38% rise and above the top end of the RBI's 2%-6% band. It is thought the RBI will look through inflation overshoots in order to safeguard the recovery, but the overshoot has caught many off guard and caused speculation around impending input price pressures. As a note RBI Deputy Governor Patra said earlier in June that the Bank has chosen to look through a recent surge in inflation because it was supply-side driven, and will only turn persistent when demand kicks in. The RBI expects inflation to end up at 5.1% in the fiscal year ending March.

SOUTH KOREA: Little of note from South Korea today, futures opened lower but moved back up to neutral levels as equity markets failed to make headway. On the coronavirus front there were 374 new cases in the past 24 hours, the lowest since late March. The vaccination drive has gathered steam with inoculations expected to top 13 million soon. Finance Minister Hong said late yesterday that the government will consider repaying part of the country's national debt with excess tax revenue when it draws up another extra budget.

CHINA: The PBOC rolled over MLF loans today, injecting CNY 200bn at the normal 2.95% rate. The Bank injected CNY 10bn of reverse repos, resulting in a net drain of CNY 10bn with CNY 20bn coming due today. Futures are just keeping in positive territory, recovering early losses as equity markets in China drop. The China Securities Journal reported that the PBOC is expected to add liquidity in June, a sentiment floated several times in the past few weeks.

INDONESIA: Yields higher across the curve, Indonesian off'ls announced Monday that they are introducing stricter mobility curbs and capacity limits through Jun 28, adding that police patrols will be deployed to enforce compliance. Data earlier showed a wider trade surplus in May on the back of higher commodity prices.