South Korea Second Budget Shock Reversed

Uncertain risk sentiment saw muted moves in the fixed income space, with the exception of South Korea where futures cratered on reports of an additional budget and then rallied on the denial.

• INDIA: Yields mostly lower in early trade. Participants await an INR 110bn state debt sale. Auctions on Friday were smooth, the RBI took the opportunity to sell more than the advertised amount amid decent demand. The central bank sold INR 378bn against an announced target of INR 320bn. The move saw bonds give up early gains though, yields finished around 1bps higher. The RBI also approved an INR 991.2bn dividend to the government on Friday, higher than expected, which helped assuage some worries over coronavirus financing for the finance ministry.
• SOUTH KOREA: Futures in South Korea are lower, but off worst levels. The initial move lower came after reports in Asia Business Daily that the government was internally considering a second extra budget plan. The finance ministry then issued a denial which saw futures come off worst levels, but fail to recover all of their losses. Elsewhere, a 5-year auction was taken down smoothly with the government selling around KRW 120bn more than planned.
• CHINA: Futures in China are in negative territory, grinding lower through the session. A PBOC policy advisor told MNI the PBOC is likely to keep liquidity stable unless the consumer price index rises over 3% year-on-year while continuing to restrict further credit expansion in the hot property market.
• INDONESIA: Yields mixed, curve twist steepens. Bank Indonesia said Friday that its third week survey suggested that CPI may come in at +1.69% Y/Y this month. The Bank begin their policy meeting, with decision announcement coming up tomorrow. The MPC are widely expected to leave their benchmark interest rate unchanged for the fourth straight time.