AsianBondsOnline Newsletter (14 March 2016)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160314.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 7 - 11 March 2016

On 10 March, the European Central Bank (ECB) reduced key policy rates and expanded its asset purchase program. The ECB reduced the main refinancing operation rate and the marginal lending facility rate by 5 basis points (bps) each to 0.0% and 0.25%, respectively. The ECB also reduced the deposit facility rate by 10 bps to –0.40% and expanded its monthly asset purchases from EUR60 billion to EUR80 billion.

*     The Bank of Korea’s Monetary Policy Board decided on 10 March to keep the base rate unchanged at 1.50%. On 9 March, the Monetary Policy Committee of Bank Negara Malaysia decided to maintain the overnight policy rate at 3.25%.

*     Japan’s real gross domestic product contracted a revised 0.3% quarter-on-quarter (q-o-q) in 4Q15 from a preliminary estimate of 0.4% q-o-q. This was primarily due a smaller q-o-q decline in private demand of 0.5% compared with a preliminary estimate of 0.6%, driven by the higher q-o-q growth in private nonresidential investment. The decline in exports of goods and services also narrowed to 0.8% q-o-q from a preliminary estimate of 0.9% q-o-q. Industrial production growth in Malaysia rose to 3.2% year-on-year (y-o-y) in January from 2.7% y-o-y in December.

*     Consumer price inflation in the People’s Republic of China (PRC) rose to 2.3% y-o-y in February from 1.8% y-o-y in January. The acceleration in consumer price inflation was due to a seasonal rise in food prices due to the timing of this year’s Lunar New Year.

*     The PRC’s exports fell 25.4% y-o-y in February to USD126.2 billion. Imports also fell 13.8% y-o-y in February to USD93.6 billion. As a result, the PRC reported a trade surplus of USD32.6 billion in February. The Philippines’ merchandise exports contracted for the 10th consecutive month in January. Exports declined 3.9% y-o-y in January to US$4.2 billion, following a 3.0% y-o-y decrease in December.

*     Japan’s current account surplus narrowed to JPY521 billion in January from JPY961 billion in December, mainly due to the deficits posted in the goods account, services account, and secondary income account.

*     Thailand’s Business Sentiment Index slipped to 48.2 in February from 48.5 in January—signalling worsening business sentiment in the country—amid concerns by firms over weakening demand and rising production costs.

*     Last week, the Indonesian government raised IDR31.5 trillion from the sale of 3-year retail sukuk (Islamic bonds), marking the biggest sale since retail bonds were first offered in 2009. The bonds carried a coupon rate of 8.3%. CH. Karnchang, a construction firm in Thailand, issued a THB1.5 billion 3-year bond carrying a 2.19% coupon and a THB4 billion 7-year debenture with a 3.36% coupon.

*     Korea Eximbank priced a EUR750 million 3-year bond at a 0.375% coupon last week. Also, Hyundai Capital Services priced USD500 million worth of 5-year Green bonds on a 2.875% coupon to yield 2.915%.

*     Government bond yields fell last week for all tenors in the PRC, Indonesia, and Singapore; and for most tenors in Malaysia, the Philippines, Thailand, and Viet Nam. Yields rose for all tenors in the Rep. of Korea, and for most tenors in Hong Kong, China. Yield spreads between the 2-year and 10-year tenors narrowed for the PRC; Hong Kong, China; Singapore; and Viet Nam. Yield spreads widened for Indonesia, the Rep. of Korea, Malaysia, the Philippines, and Thailand.

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