News Highlights - Week of 18 - 22 July 2016

To read the full report, data and graphs go to http://asianbondsonline.adb.org/newsletters/abowdh20160725.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 18 - 22 July 2016

Last week, the European Central Bank (ECB) left its key policy rates on refinancing operations, the marginal lending facility, and the deposit facility unchanged at zero, 0.25%, and –0.40%, respectively. The ECB will also continue its quantitative easing program of monthly asset purchases of EUR80 billion until March 2017. The program can be extended should economic conditions warrant. The central bank’s decisions are based on its assessment that the European Union (EU) will continue to grow in the second quarter of 2016, albeit at a lower rate compared with the prior quarter. Inflation is expected to remain positive while remaining at low levels due to base effects in energy prices. The ECB also noted that financial markets have largely weathered the uncertainties resulting from the United Kingdom’s referendum to leave the EU and that central banks can provide liquidity in the event of market stress. 

*     In its meeting held on 20–21 July, Bank Indonesia’s Board of Governors decided to keep its policy rate unchanged at 6.50%. The central bank also held steady the deposit facility rate (4.50%), the lending facility rate (5.25%), and the 7-day reverse repo rate (5.25%).

*     Consumer price inflation in Hong Kong, China slowed to 2.4% year-on-year (y-o-y) in June from 2.6% y-o-y in May. The decline in the inflation rate was mostly due to slower price increases in food and housing, and a larger decline in utilities prices. The Consumer Price Index in Malaysia eased to 1.6% y-o-y in June from 2.0% y-o-y in May as six out of twelve major commodity groups posted lower annual increases in June.

*     Singapore’s non-oil domestic exports contracted 2.3% y-o-y in June after unexpectedly rising 11.6% y-o-y in May. Non-oil domestic exports to the People’s Republic of China (PRC), the EU, Indonesia, Japan, and Thailand all declined reflecting the negative shock on Singapore’s top trading partners of the decision of the United Kingdom to withdraw from the EU.

*     Producer prices in the Republic of Korea fell 2.7% y-o-y but rose 0.2% month-on-month in June, according to the latest Producer Price Index report of the Bank of Korea. The annual decline in the Producer Price Index for in June was mainly due to y-o-y decreases in the prices of manufacturing products and utilities.

*     Busan Bank in the Republic of Korea priced a USD250 million contingent convertible bond with a 3.675% coupon last week. The bond has a maturity of 10 years.

*     Upcoming data releases this week include trade data for Hong Kong, China; the Republic of Korea, the Philippines, and Thailand; industrial production data for Japan, the Republic of Korea, and Singapore; and consumer price inflation data for Indonesia, Japan, and Thailand. Also scheduled is the Purchasing Managers Index for manufacturing in the PRC and gross domestic product for the second quarter of 2016 in the Republic of Korea. 

*     Government bond yields rose last week for all maturities in Hong Kong, China; Republic of Korea, and Thailand and for most tenors in Singapore, while most yields were down in the PRC, Indonesia, and the Philippines. In Malaysia and Viet Nam, yields rose for longer tenors but were down for most of the shorter maturities. Yield spreads between 2- and 10-year tenors widened in Hong Kong, China; the Republic of Korea, Malaysia, Thailand and Viet Nam but narrowed in the PRC, Indonesia, the Philippines, and Singapore.

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