Related insights_tr
Global risk sentiments are likely to stay poor with Europe's deepening energy crisis and more growth-negative covid news out of China. Markets are now more relaxed about growth risks in the US, compared to earlier in the year. But recession risks in Eurozone and UK and a weak Chinese recovery are at the top of investor worries. From the perspective of Asia rates and bonds, the right side of the dollar smile could hurt as much as the left.
CNY Rates - Post month-end, 7D repo fixing came back down to 1.5% level. Even though there has been more growth-negative covid news in recent days, we think CNY rates are likely to be stable and see potential further downside capped at 3-5bps in the near term. PBOC has set stronger-than-survey USDCNY fixing for nine straight days and had yesterday announced a 2% reduction in FX Deposit RRR. Allowing CNY rates to fall by a large extent would run counter to their efforts to slow CNY depreciation. With 1Y CNY rates expected to be stable, and Europe's gas crisis putting downward pressures on year-ahead Fed hike pricing, there could be a small retracement higher in 12M onshore/offshore forward points.
KRW Rates - Friday morning's release of August inflation has literally put the brakes on the recent surge in KRW rates. IRS rates have pulled back by 15-20bps and the 1Y-2Y spread re-flattened as markets shorten the priced hike cycle. In the near term, worries about domestic inflation are easing, and hence, KRW rates will predominantly be driven by US rates. BOK Governor has signalled that BOK is unlikely to stop hiking before the US Fed and therefore, markets will likely associate a higher Fed terminal rate with a higher BOK terminal rate.
IDR Rates - Over the weekend, Indonesia announced hikes to fuel prices (diesel/Pertalite/Pertamax). While the hikes would help to curb fiscal slippage risks, bond markets are instead likely to focus on the upcoming jump in inflation prints and the resulting upward risks to BI rate trajectory. 5Y IndoGB yields jumped 11bps on Monday. Beyond the near term price response, the fuel price hikes are likely to weigh on offshore sentiments towards IndoGBs, where our tracker shows that positioning had already turned underweight prior to August's 25bps hike. Foreign investors that we speak to frequently state IndoGB's high real yields as a key draw. If inflation rises to 6-7%, most of that real yield would be gone.
Topic
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.