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RBI Reverse Repo Results In Rout

ASIA RATES
  • INDIA: Curve twist flattens in early trade. Bonds fell yesterday after the RBI conducted its 7-day reverse repo at 3.99%, 57bps above the previous operation and just shy of the RBI's main benchmark policy rate of 4.00%. The operation caused speculation that the Central Bank is embarking on a path to normalisation earlier than expected. The liquidity drain at a higher rate comes hot on the heels of the RBI's decision to make its GSAP operations neutral by including an equivalent sell leg to the auctions. Market participants await today's T-Bill auction to assess cut off yields for further signs of policy tightening from the RBI.
  • SOUTH KOREA: Short end yields are higher with 3-Year futures also seeing some selling pressure, A minister said yesterday that the government expects to transition back to normal life between October and November, this would entail easing social distancing rules for fully vaccinated people as well loosening restrictions on private gatherings. The positive outlook has sparked speculation that the October BoK meeting could be live after the Central Bank hiked 25bps at its previous meeting. 3-Year future is down 5 ticks at 109.24, 10-Year future up 17 ticks at 124.04. 3-Year yield up 4.4bps at 1.650%, US/SK 2-Year yield spread narrows further as a result of the short end buying in South Korea, last at 106.42bps from wides of around 134bps in early Septembe
  • CHINA: The PBOC injected a net CNY 40bn of liquidity into the financial system today, the Central Bank is has exclusively used 14-day reverse repos for the past five sessions with the last of the 7-day issues coming due tomorrow. Repo rates diverged with the overnight repo rate briefly dropping to the lowest since June 28, while the 7-day repo rate briefly touched the highest since June 30. Futures are lower, earlier reports that Japan's GPIF would not invest in yuan-denominated Chinese government bonds citing the country's bond-market environment and other factors. The GPIF will continue to use a version of the FTSE Russell World Government Bond Index as its benchmark, an index that does not include Chinese debt. FTSE Russell has said it will add Chinese debt to its benchmark global bond index from October.
  • INDONESIA: Yields higher across the curve with some steepening evident. The finance ministry sold IDR 12t of debt at auction yesterday, meeting its indicative target. The ministry also announced it will issue a new series of Islamic T-bills and reopen auction for five series of bonds
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