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ASIA RATES

Indian markets return after a holiday with bonds under pressure after reports that borrowing could be increased again, the announcement of an expansive budget in February pushed yields higher. Indonesia however return to some positive sentiment after a decent debt sale on Tuesday.

  • INDIA: Yields higher in early trade as bonds come under pressure. There was a Bloomberg sources article which said India could have to increase borrowing again this year in order to compensate states for revenue losses due to a shortfall in consumption tax collection nationwide. According to the report the additional borrowing requirement is estimated at INR 1.58tn. A panel is set to meet on Friday to discuss the issue. If there was to be extra borrowing in-line with estimates it would mean total borrowing this fiscal year of INR 13.58tn. The RBI has already had to indulge market participants with various support/liquidity operations such as Operation Twist and the GSAP.
  • SOUTH KOREA: Futures lower as the BoK kept rates on hold as expected but upgraded growth forecasts. BoK Governor Lee said that monetary policy would remain accommodative, but that the bank would start thinking about the orderly adjustment of its policy stance. Lee added a potential rate hike this year depends on the economic recovery. He also noted an extra budget would raise GDP growth by 0.1-0.2ppts, which could spark concerns of additional supply. The June auction plan will be released later today.
  • CHINA: Overnight repo rates rose, but the 7-day repo rate declined, both still within recent ranges; the PBOC matched maturities with injections. Futures are lower after declining into the close yesterday. There were reports on the wires that US trade chief Tai and Chinese counterpart Liu have held constructive talks over the phone and agreed that trade is very important. Both sides said talks will continue.
  • INDONESIA: Indonesian bonds rise as markets return from a holiday, the sale of government debt went down well on Tuesday, the sale raised more funds than planned. Indonesia sold IDR 32.55t of bonds and bills at Tuesday's auction after receiving IDR 78.16t of bids, exceeding the finance ministry's target for the first time since January 5.

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