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India To Tap New 10-Year Line

ASIA RATES
  • INDIA: Yields mostly higher in early trade. Bonds giving back after rising yesterday following comments from RBI Governor Das, he reassured markets of the RBI's dovish intentions despite overshooting inflation. He noted that the Bank was monitoring the inflation situation and that price growth should slow in Q3. He said growth was the main focus and inflation was just a transitory hump. Das also confirmed that the GSAP operations were targeting the belly of the curve in the 6- to 12-Year maturities. Also supporting bonds was the GSAP operation, the operation went down smoothly and the Bank bought INR 200bn from the lines states with the majority of purchases coming from the 7.57% 2033 (INR 58bn) and 7.17% 2028 (INR 49.7bn) lines. Focus today will be on the INR 260bn auctions with markets watching to see the result of the first tap of a new 10-year line.
  • SOUTH KOREA: Futures lower today after rising sharply this week. South Korea reports another record high daily COVID-19 cases of 1,316. The KDCA warned cases could peak at over 2,000 per day before they start dropping and predict approximately 1,400 per day by the end of July. As concerns over a fourth wave of outbreaks over the summer grew, health authorities decided to extend current distancing curbs in the greater Seoul area for one week on Wednesday but warned of further tougher measures unless the current situation is brought under control. Yesterday the government said this was the beginning for a fourth wave and today have made the decision to tighten restrictions to the highest level in Seoul.
  • CHINA: The PBOC matched maturities with injections at its OMO operations again today. The overnight repo rate has jumped, rising above its 7-day counterpart. Overnight repo rate last up 32bps at 2.2266% while the 7-day repo rate is hovering around yesterday's intraday highs at 2.2143%, slightly above the PBOC's 2.20% prevailing rate. Futures are slightly lower after recovering opening losses. Data earlier showed CPI rose 1.1%, slightly below estimates of 1.2% and down from 1.3% in May. PPI rose 8.8%, in line with estimates and down from 9.0% in May. Slightly lower CPI figures could clear the way for the PBOC who have intimated a switch in policy bias with discussion of a targeted RRR cut and supportive fiscal measures.
  • INDONESIA: Yields higher across the curve. The World Bank downgraded Indonesia to lower-middle income status after naming it an upper-middle income country last year. The revision came on the back of the economic hit from the Covid-19 pandemic. Data earlier showed Indonesia's retail sales index rose 14.7% Y/Y in May.
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