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PBOC Drains Liquidity After Month End Injection

ASIA RATES
  • INDIA: Yields holding steady in early trade. Bonds are likely to tread water today ahead of the RBI rate announcement tomorrow. The RBI are expected to keep policy settings unchanged at the August meeting amid concerns over growth and a potential third Covid wave. All 21 economists surveyed by Bloomberg expect the MPC to leave the benchmark repurchase rate unchanged. While the RBI is widely expected to announce another tranche of its so-called government securities acquisition program, bond traders will be watching for any cues on return to policy normalisation especially with inflation running above the RBI's target band.
  • SOUTH KOREA: Futures are mixed in South Korea with the 10-Year contract coming under pressure and the 3-Year contract higher. On the coronavirus front there were 1,776 new cases on Thursday, above 1,700 for the second day. Health authorities are expected to extend the current distancing rules, which have been in place since mid-July for another two weeks, at a meeting on Friday. There were reports in Yonhap that South Korea could fully vaccinate 70% of its population by late October. There were also reports that BoK's Koh, the dissenter at the last meeting and known as one of the most hawkish members, has been named as the head of the FSC in South Korea.
  • CHINA: The PBOC drained a net CNY 20bn at its OMO operations after the injections last week mature. Repo rates are steady, the overnight repo rate is up 1.3bps at 1.7013% while the 7-day repo rate is up 3.6bps at 1.8563%. Futures are higher, bouncing after a two day losing streak, 10-Year contract up 9 ticks at 110.365, equity markets are hovering around neutral while the yuan is flat in a session with few catalysts.
  • INDONESIA: Yields higher across the curve, bonds coming of the back of a five day winning streak. data showed GDP rose 3.31% in Q2 against estimates of 2.69% Q/Q. Indonesia's death toll from Covid-19 has eclipsed 100,000 on Wednesday, as the country reported 1,747 new fatalities. More than a third of all deaths occurred in July, as rapid spread of new infections put a strain on the healthcare system and caused oxygen shortages. Worth flagging that FinMin Indrawati urged commercial lenders to help stimulate economic recovery by playing their part and boosting loan disbursement. Indrawati warned that "it will be very difficult for the economy to recover until the financial sector resumes lending growth".
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