AsianBondsOnline Newsletter (15 February 2016)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160215.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 8 - 12 February 2016

Bangko Sentral ng Pilipinas (BSP) decided on 11 February to keep unchanged the overnight borrowing rate at 4.0% and the overnight lending facility at 6.0%. Interest rates on special deposit accounts and reserve requirement ratios were also maintained at current levels. The BSP stated that average inflation for 2016–2017 would likely settle in the range of 2.0%–4.0%. The central bank noted downward pressure on inflation coming from slower global economic activity and lower oil prices; and upward pressure coming from the effects of El Nino on food and utilities prices, as well as pending adjustments in power rates.

*     Industrial production growth in Malaysia rose to 2.7% year-on-year (y-o-y) in December from 1.8% y-o-y in November. The accelerating growth was driven by the higher annual increase in the electricity index of 5.6% in December compared with 2.0% in November. Meanwhile, the mining index continued to contract in December, falling 1.5% y-o-y after declining 4.1% y-o-y in November.

*     The Philippines’ merchandise exports contracted for the ninth consecutive month in December. Exports declined 3.0% y-o-y in December to US$4.7 billion following a 1.1% y-o-y decrease in November. The decline in exports was largely due to annual decreases in six major commodity groups: articles of apparel and clothing accessories (–42.7%), chemicals (–39.2%), other manufactures (–23.8%), machinery and transport equipment (–17.0%), metal components (–16.5%), and electronic equipment and parts (–5.3%).

*     Japan’s current account surplus narrowed to JPY961 billion in December from JPY1,144 billion in November, mainly due to a drop in the primary income account surplus to JPY1,012 billion from JPY1,542 billion a month earlier. The services account also posted a deficit of JPY171 billion in December after a surplus of JPY62 billion in November. Meanwhile, the goods account posted a JPY189 billion surplus in December, a reversal from the JPY272 billion deficit posted in the previous month.

*     The People’s Republic of China’s (PRC)  foreign exchange reserves  fell US$99.5 billion month-on-month in January  to US$3,231 billion. The decline was due mainly to steps taken by the People’s Bank of China to defend the currency. In Indonesia,  foreign exchange reserves slipped to US$102.1 billion in January from US$105.9 billion in December. The decline was attributed to foreign debt payments, including servicing for maturing global bonds.

*     Some of the largest government bond issuances last week included  (i) Indonesia’s 2-year project-based sukuk (Islamic bonds) worth IDR2,920 billion at a yield of 8.12% and a coupon of 7.75%, and 4-year project-based sukuk worth IDR1,330 billion with a yield of 8.22% and a coupon rate of 8.25%; (ii) Japan’s 30-year government bond worth JPY874.9 billion at a yield of 1.07% and a coupon rate of 1.40%; and (iii) Thailand’s 4.37-year government bond worth THB23.8 billion with a yield of 1.64% and a coupon rate of 2.55%.

*     Local currency government bond yields in emerging East Asia fell for all tenors in Indonesia, the Republic of Korea, and Thailand, and for most tenors in Singapore widely tracking movements in US Treasuries. On the other hand, yields were mixed in Hong Kong, China and the Philippines while it was unchanged in the PRC and Viet Nam as both markets were closed for the Lunar New Year and Tet holidays, respectively.  The spread between 2- and 10-year yields narrowed for most emerging East Asian markets except for Indonesia.

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