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RBI Initiatives Backfire As Yields Rise

ASIA RATES
  • INDIA: Yields higher across the curve. The RBI announced yesterday it would purchase INR 200bn of bonds through its GSAP 2.0, the issues eligible are less liquid than under the first set of purchases. The Bank also announced Friday's INR 260bn auction would feature a new 10-year bond. The RBI also confirmed yesterday that it will start using the uniform price auction method for auctions.
  • SOUTH KOREA: Futures in South Korea are lower along with other bonds in the region. In the cash space yields are lower in the short end. 2-Year supply from the MOF was smoothly taken down. Elsewhere the finance minister has repeated that the government plans to step up efforts to curb the growth of its national debt in a bid to improve fiscal soundness. Last week South Korea launched consultations with ratings agency Fitch, the meetings will run until Thursday.
  • CHINA: The PBOC drained CNY 20bn from the financial system again, a total of CNY 80bn from the CNY 100bn injected heading into month-end. Repo rates have crept higher for the second session but are still well below recent highs. Higher repo rates has put pressure on the cash space, yields higher across the curve with some steepening seen. There were reports that foreign investors bought CNY 13.39bn of Chinese government bonds in June, the second month of lower purchases. Local government bonds through saw net purchases of CNY 730m, the biggest purchase on record.
  • INDONESIA: Yields mostly lower. During yesterday's media briefing, FinMin Indrawati warned that Indonesia's GDP growth could slow to +4.0% Y/Y in Q3 (prev. forecast was +6.5%) as the authorities struggle to contain a surge in Covid-19 infections. Indrawati estimated that the economy could still grow by close to 5.0% this quarter if the current wave of coronavirus is contained this month. Meanwhile, Indonesia continues its battle against the relentless surge in new Covid-19 cases, exacerbated by severe ICU bed shortages and an oxygen crisis. Some patients seeking emergency treatment have had to be turned away over the recent days, while CNN Indonesia reported that dozens of patients died in one hospital over the weekend, after the facility ran out of oxygen.
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