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Rising Tide Lifts All Boats In China

  • INDIA: Yields lower in early trade, even amid general risk on sentiment in the region which has boosted oil prices. Bonds are expected to come under pressure as the session goes on. Markets will look out for an announcement from the RBI about bond purchases next week, with hopes that more illiquid issues will be eligible again. Risk on sentiment should also be supported by lower case numbers in India. There were 43,654 cases yesterday, down from a peak of over 400k in May. Health officials said late yesterday India will meet its target of supplying more than half a billion COVID-19 vaccine doses to states by the end of this month
  • SOUTH KOREA: Futures lower on Thursday as risk assets rebound in South Korea thanks to a generally more benign risk tone and a dip in coronavirus case numbers. 10-Year futures have been grinding lower throughout the session after finishing at highs yesterday. Short end US-South Korea spreads are slightly wider after the FOMC decision. US-SK 2-Year spread at 113.82bps from lows of 119.625bps hit earlier in July. Following the FOMC decision yesterday Vice Fin Min Lee said that the announcement was expected to have little impact on local markets and added that the government was closely watching the virus trend and its impact on markets as well as other instability factors. Positive risk sentiment has been boosted by earnings including Samsung who reported earnings earlier.
  • CHINA: The PBOC injected a net CNY 20bn of liquidity into the financial system today, the first injection since the end of June. Repo rates have fallen as a result, the overnight repo rate at 1.6329% from highs above 2.10% yesterday, the 7-day repo rate down 26bps on the day at 2.2373% but still above the PBOC's rate. The moves comes after a rout of Chinese assets and several other attempts by officials to stem the wave of selling including soothing articles in state media and the CSRC meeting with banks. Risk sentiment has rebounded in China with equity markets seeing gains, a rising tide lifts all boats and Chinese bond futures are also higher.
  • INDONESIA: Yields mixed with the curve twist flattening. Although Indonesia's daily Covid-19 cases eased further, the death toll continues to climb. The local press flagged concerns surrounding Indonesia's reporting and counting methods, with Jakarta Post noting that "the government [does not include] deaths outside of healthcare facilities in its daily official tally". Markets still digesting the move by the IMF to downgrade its 2021 growth forecast for Indonesia to +3.9% Y/Y from +4.3% projected in April, as the spread of the Delta variant is expected to weigh on economic recovery.

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