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Lower India CPI Boosts Bonds

ASIA RATES
  • INDIA: Yields lower, curve steepens. Data late yesterday showed CPI rose at the slowest pace in five months, CPI undershot estimates in September at 4.35% slowing from 5.30% in August. The data is likely to assuage some fears that inflation overshoots will force the RBI to act prematurely. However, the exuberance may be shortlived as the base effect is expected to fade from November. Other data showed industrial production rose 11.9%, above estimates of 11.6%. Bonds are also likely to get a boost today as oil prices take a breather from their recent rally. Trade balance data could fall as early as today, the trade deficit is expected to widen to $22.9bn from $13.8bn previously.
  • SOUTH KOREA: Futures higher, tracking a move in US Treasury's overnight; short end rates demonstrating the effects of the hawkish hold from the BoK yesterday still holding most of post-BoK declines. Labour market data and export data were both robust, while South Korean PM Kim said earlier that the government is considering introducing a vaccine pass system to benefit fully vaccinated people, as it plans to adopt a gradual scheme named "living with COVID-19" to get back to normal life on Nov. 9.
  • CHINA: The PBOC drained CNY 90bn as additional liquidity from the Golden Week holiday continued to roll off; repo rates diverged with the overnight rate and the 7-day repo rate inverted. Overnight repo rate up 25.5bps at 2.1549%, 7-day repo rate down 2.9bps at 2.1889%. Futures higher, 10-Year contract up 7.5 ticks at 99.125 as equity markets struggle. There has been renewed focus on pieces in state media positing that the PBOC could cut the RRR as soon as this quarter, while another piece opines that the Central Bank could roll over this month's MLF later this week with a larger amount. Government bonds are also attractive in comparison to corporate issues as the Evergrande saga drags on, the IMF weighed in and said: ""While the authorities have the tools to step in if the situation were to escalate, there is a risk that broader financial stress may emerge, with implications for both the Chinese economy and financial sector as well as global capital markets at the extreme".
  • INDONESIA: Yields mixed across the curve. The Indonesian government met its target of IDR 8tn in bond sales with bids of IDR 50.1tn. Indonesian monthly trade data will be published on Friday. Looking further afield, Bank Indonesia will deliver their monetary policy decision next Tuesday.
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