FW: RHB FIC Rates & FX Market Update - 28/9/17

 

 

28 September 2017

 

 

Rates & FX Market Update

 

 

Fed's Rosengren Voiced Support for Gradual FFR Hikes

 

Highlights

 

¨   Global Markets: 2y and 10y UST yields were c.4-8bps higher overnight, after Fed's Rosengren reiterated the need to tighten policies, in line with previous communiques by Yellen, Fischer and Dudley. Details of Trump's tax plans did not excite the markets, with the final version likely to be vastly watered-down by Congress. With little or no major legislative victories on hand amid fierce opposition to the President's populist plans, and no strong evidence of a rise in support, we expect continued obstacles on Trump's policy agendas into the 2018 mid-term elections; further USD weakness over the medium-term appears likely.

¨   AxJ Markets: BoT held its benchmark rate at 1.50% as expected, while upgrading Thailand's growth outlook as the government's fiscal spending efforts began to bear fruit. However, inflation forecasts for 2017 and 2018 were cut to 0.6% and 1.2% respectively, despite the robust economic growth. With the central bank concerned over financial stability risks, we continue to eye a neutral policy stance over the coming months; stay neutral THB.

¨   USDIDR climbed c.0.5% overnight above the 13,400 handle, while volatility appears to be picking up, following the 2^nd consecutive 25bps BI rate cut. While we do not expect substantial IDR weakness at this stage, IndoGB yield movements post-BI may not bode well for the best performing AxJ govie YTD, not helped by rising geopolitical tensions; stay neutral IDR.

 

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