AsianBondsOnline Newsletter (25 April 2016)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160425.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 18 - 22 April 2016

On 21 April, Bank Indonesia’s Board of Governors decided to keep the benchmark interest rate steady after having reduced it by a cumulative 75 basis points (bps) between January and March. The central bank maintained the benchmark rate at 6.75% and also left unchanged the deposit facility rate (4.75%) and lending facility rate (7.25%). Bank Indonesia announced that it is maintaining the 7-day repo rate at 5.50%. Bank Indonesia noted that its decision to keep the policy rate on hold was consistent with efforts to keep inflation within its target range of 3.0%-5.0% for 2016. The Bank of Korea’s Monetary Policy Board decided on 19 April to keep the base rate unchanged at 1.50%.

*     Hong Kong, China’s inflation rate eased to 3.0% year-on-year (y-o-y) in March, after rising 3.1% y-o-y in February, due to a moderation in price increases for food brought about by improvements in the weather. In Malaysia, consumer price inflation decelerated to 2.6% y-o-y in March from 4.2% y-o-y in February, primarily due to the 8.2% y-o-y contraction in transport prices in March.

*     The Bank of Korea reported last week that it has revised downward its 2016 economic growth and inflation outlook for the Republic of Korea, lowering its gross domestic product growth forecast to 2.8% from its previous projection of 3.0% made in January, and its headline consumer price inflation forecast to 1.2% from 1.4%.

*     The Producer Price Index in the Republic of Korea fell 3.3% y-o-y and 0.1% month-on-month (m-o-m) in March, according to the latest data from the Bank of Korea released last week. The drop in the index was largely induced by falling producer prices for utilities.

*     Japan’s trade surplus widened to JPY755 billion in March from JPY242 billion in February. Exports of goods rose 13.2% m-o-m to JPY6.5 trillion in March and imports increased 4.4% m-o-m to JPY5.7 trillion. In Singapore, non-oil domestic exports (NODX) fell 15.6% y-o-y in March, reversing the 2.0% y-o-y growth posted in April. Both electronic NODX (–9.1% y-o-y) and non-electronic NODX (–18.0% y-o-y) recorded declines in March.

*     Standard & Poor's announced last week that it has affirmed its sovereign credit ratings for the Philippines. The long-term and short-term ratings were maintained at BBB and A-2, respectively, and the outlook remained stable. The agency stated that the rating affirmation resulted from its assessment of the Philippines as having a strong external position, which is counterbalanced by the economy's “low-income status and… vulnerabilities in its institutional and governance framework.”

*     BOC Aviation, a Singapore-based company engaged in aircraft leasing, priced a 10-year USD750 million bond last week with a coupon rate of 3.875%. Total orders for the bond reached USD3.2 billion and a majority of the bond was purchased by Asian-based investors.

*     Local currency government bond yields in emerging East Asia mostly rose in Hong Kong, China; Indonesia; Malaysia; Philippines; Singapore; and Thailand, and for all tenors in the People’s Republic of China (PRC), ahead of the United States Federal Reserve meeting scheduled this week. On the other hand, yields fell for all tenors in the Republic of Korea, following downward revision in its economic growth and inflation outlook. Yields were mixed in Viet Nam. The spread between the 2- and 10-year yields widened for most emerging East Asian markets except for the PRC; Hong Kong, China; Philippines; and Thailand where spreads narrowed last week.

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