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(M2)‌‌ Trend Conditions Remain Bearish

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ASIA RATES

China bucking the regional trend again is no surprise, fixed income space mostly pressured lower by a move down in UST's post-FOMC, while in India focus turns to GSAP ops later in the session.

  • INDIA: Yields lower in early trade. Participants await the latest round of GSAP operations from the RBI today, the bank will purchase INR 350bn of debt in a range of maturities from 2024 to 2035. When this operation was announced last week there was some disappointment in the market. There was an expectation that RBI would look to buy back some of the liquid papers, but the absence of 5-year paper in the choice of eligible issues is conspicuous, while other other papers are relatively illiquid.
  • SOUTH KOREA: Futures in South Korea are lower, playing catch up with a move in UST's after the FOMC minutes indicated some members were willing to discuss a future taper. 10-year contract is down 21 ticks having gapped lower at the open. The contract is off session lows at 125.49. Elsewhere, the BoK sold KRW 2.2tn of 2-year MSB's, yield 0.92%, cover 1.0818x.
  • CHINA: The PBOC matched injections with maturities, the overnight repo rate rose 5bps to 2.0808% while the seven-day repo rate rose 2.2bps to 2.1619%. Both rates are well below this week's highs. Futures gapped higher at the open and held gains. China's 1- & 5-Year Loan Prime Rates were kept on hold at 3.85% and 4.65% respectively. The decision was in line with expectations. LPR rates have been unchanged since April 2020 when the PBOC cut rates to help cope with the impact of the pandemic. The MLF, which is linked to the LPR, was unchanged for the 14th month earlier this week. While there was speculation that the PBOC could increase the LPR's to help reign in rising producer prices, the bank said in its Q1 Monetary Policy report that the pickup in inflation is expected to be transitory and the bank could look through the readings.
  • INDONESIA: Yields higher across the curve with bear flattening seen. Econ Min Hartarto revealed that Pres Widodo has submitted a letter to lawmakers to begin debate on revisions to tax law. Proposed changes could include a carbon tax & possible tax amnesty.

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