AsianBondsOnline Newsletter (21 March 2016)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160321.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 14 - 18 March 2016

Emerging East Asian bond market yields fell in the first month and a half of 2016 on slower economic growth. In addition, bond markets face growing risks from possible capital outflows, a stronger United States (US) dollar, and a loss of investor confidence says the latest Asia Bond Monitor report. Total outstanding local currency bonds grew 5% quarter-on-quarter, and were up almost 18% year-on-year (y-o-y), totaling over USD9.1 trillion at the end of December. The People’s Republic of China (PRC) remains, by far, the largest market, accounting for more than two-thirds of the region’s total outstanding bond stock. For a copy of the full report please click on the following link: https://asianbondsonline.adb.org/documents/abm_mar_2016.pdf?src=spotlight.

*     The US Federal Reserve on 16 March left unchanged the target for the federal funds rate at 0.25%–0.50%. The Federal Reserve said it chose to maintain its accommodative monetary policy due to concerns over global economic conditions and financial developments. Also on 15 March, the Bank of Japan announced that it would maintain its qualitative and quantitative monetary easing measures, along with its negative interest rate measures. Bank Indonesia decided to cut its benchmark interest rate by 25 basis points to 6.75% at its 16-17 March meeting. 

*     Indonesia reported a trade surplus of USD1,136 million in February, compared with a revised surplus of USD14 million in January. Exports declined 7.2% y-o-y in February while imports contracted 11.7% y-o-y. Japan posted a trade surplus of JPY243 billion in February, reversing a deficit of JPY689 billion in January. In Singapore, non-oil domestic exports climbed 2.1% y-o-y in February after contracting 10.1% y-o-y in January.

*     Bank Negara Malaysia and Bank of Thailand jointly introduced a local currency settlement framework on 14 March to promote the use of the Malaysian ringgit and the Thai baht in bilateral trade. Bank Negara Malaysia also signed Heads of Agreements with both Bangko Sentral ng Pilipinas and the Bank of Thailand on the entry of Qualified ASEAN Banks into their respective markets. 

*     In the Republic of Korea, foreign investors sold a net KRW4.2 trillion worth of listed local currency bonds in February, compared with net bond sales of KRW0.5 trillion in January.

*     Minor International, a hospitality and restaurant operator in Thailand, issued THB2.8 billion worth of 5-year bonds carrying a 2.27% coupon and THB1.2 billion worth of 15-year bonds at a 3.95% coupon. United Overseas Bank (Thai) issued THB5 billion worth of 3-year bonds at a 1.85% coupon and another THB5 billion worth of 5-year bonds at a 2.16% coupon.

*     BOCOM Leasing, a subsidiary of the PRC-based Bank of Communications, priced a USD1 billion dual-tranche bond last week.  The USD400 million 3-year tranche was priced at a coupon rate of 2.125% and a yield of 2.23%.  The USD600 million 5-year tranche was priced at a coupon rate of 2.625% and a yield of 2.748%.

*     Government bond yields fell for all tenors in the PRC, Hong Kong, China and Thailand and fell for most tenors in the remaining markets in emerging East Asia except in Viet Nam, where yield movements were mixed, following the Federal Reserve’s pause in raising its policy rate last week.  The 2-year versus 10-year spread rose in the PRC;  Hong Kong, China; Indonesia and Viet Nam but fell in other emerging East Asia markets.

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