AsianBondsOnline Newsletter (22 February 2016)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160222.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 15 - 19 February 2016

Bank Indonesia decided to lower its benchmark interest rate by 25 basis points (bps) to 7.00% in a meeting held on 17–18 February. Both the deposit facility and the lending facility rates were also reduced by 25 bps to 5.00% and 7.50%, respectively. The central bank also lowered the primary reserve requirement by 1 percentage point to 6.50% effective 16 March. Bank Indonesia believes there is sufficient room for monetary easing given that inflationary pressures are expected to be less intense. On 16 February, the Bank of Korea announced it was keeping the base rate unchanged at 1.50%. 

*     The People’s Bank of China (PBOC) announced last week that it would hold daily auctions for repurchase and reverse repurchase agreements. In the past, the PBOC held open market operations twice a week.

*     Japan’s real gross domestic product (GDP) contracted at an annualized rate of 1.4% in 4Q15, following 1.3% growth in 3Q15. The contraction was mainly due to annualized declines in private consumption of 3.3% and private residential investment of 4.8%. In Malaysia, GDP growth slowed to 4.5% year-on-year (y-o-y) in 4Q15 from 4.7% y-o-y in 3Q15, due to weaker growth in government spending and gross fixed capital formation. Thailand’s real GDP growth slowed to 2.8% y-o-y in 4Q15 from 2.9% y-o-y in 3Q15.

*     The People’s Republic of China’s (PRC) consumer price inflation rose in January to 1.8% y-o-y from 1.6% y-o-y in December, due to a seasonal rise in food prices. The Republic of Korea’s Producer Price Index (PPI) fell 3.3% y-o-y and 0.5% month-on-month (m-o-m) in January due to falling product prices in the manufacturing and utilities wholesale markets.

*     Exports from Indonesia contracted 20.7% y-o-y to US$10.5 billion in January after declining 17.5% y-o-y a month earlier. The continued weakness in export performance was due mainly to falling commodity prices and weak global demand. A trade surplus amounting to US$50.6 million was recorded in January, a turnaround from a trade deficit of US$161 million in December. Japan posted a trade deficit of JPY646 billion in January, reversing a surplus of JPY140 billion in December. In Singapore, non-oil domestic exports (NODX) continued to contract, falling 9.9% y-o-y in January after a 7.2% y-o-y decline a month earlier, as both electronic and non-electronic NODX recorded declines during the review period. 

*     Last week, the Government of the Philippines issued US$2.0 billion worth of 25-year global bonds. A 1-day accelerated switch tender offer for 16 series of US$-denominated bonds maturing between 2016 and 2037 was also conducted. Of the US$2.0 billion issue size, U$1.5 billion will be swapped with outstanding securities, while the remaining US$500 million comprises new debt. The bonds were priced at par with a coupon of 3.70%.

*     Yields fell for all tenors in Hong Kong, China and Viet Nam and for most tenors in the PRC, due to continued low inflation and continued management of the economy’s money supply, and in the Republic of Korea, after the central bank noted continued weakness in the economy and in Malaysia, as economic growth slowed.  Yields rose for most tenors in the Philippines, Singapore and Thailand.  The 2-year versus 10-year yield spread rose for all markets except in Malaysia where yield spreads fell and in Thailand where yield spreads rose.

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