AsianBondsOnline Newsletter (24 March 2014)

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20140324.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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News Highlights - Week of 17 - 21 March 2014

Emerging East Asian local currency (LCY) bond markets remained relatively stable in 4Q13 amid the financial turmoil swirling in other emerging markets, but they still face rising risks from market contagion, tighter liquidity conditions, and potential currency depreciations, according to the March edition of the Asia Bond Monitor. The LCY bond market in emerging East Asia ended 2013 with outstanding bonds totaling US$7.4 trillion, up 2.4% from the previous quarter and 11.7% from a year earlier. The full issue of the Asia Bond Monitor is available at http://asianbondsonline.adb.org/documents/abm_mar_2014.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

*     Last week, the United States (US) Federal Open Market Committee decided during its 18-19 March meeting to further reduce the pace of its asset purchase program by lowering its monthly purchases of agency mortgage-backed securities to US$25 billion (from US$30 billion) and of longer-term treasury securities to US$30 billion (from US$35 billion), starting in April.

*     On 18 March, The State Bank of Viet Nam (SBV) reduced its key policy rates to support business activity. The refinance rate, discount rate, and overnight inter-bank lending rate were reduced 50 basis points (bps) each to 6.5%, 4.5%, and 7.5%, respectively. The cap rates on Vietnamese dong short-term deposits and US dollar deposits were cut 100 bps each to 6.0% and 1.0%, respectively.

*     Consumer prices in Hong Kong, China rose 3.9% year-on-year (y-o-y) in February, following a 4.6% gain in January, driven mostly by an increase in utilities expenses and housing rentals. Consumer price inflation in Malaysia slightly increased to 3.5% y-o-y in February from 3.4% in January. The Republic of Korea's producer price index (PPI) dropped at a faster annual pace in February, decreasing 0.9% y-o-y for the month compared with a 0.3% decline in January. On a month-on-month (m-o-m) basis, the country's PPI remained unchanged in February.

*     Hong Kong, China recorded a balance of payments surplus of HKD44.8 billion in 4Q13, compared with a deficit of HKD28.7 billion in 3Q13. The current account registered a surplus of HKD19.0 billion in 4Q13, compared with a surplus of HKD31.8 billion in 3Q13. Meanwhile, Japan's merchandise trade deficit widened to JPY800.3 billion in February from JPY773.3 billion in the same month a year earlier.

*     Personal remittances from overseas Filipinos rose 6.8% y-o-y in January to reach US$2.0 billion.

*     The Bank of China (BOC) last week priced a multi-tranche issuance of asset-backed securities comprising a CNY7.69 billion 3-year tranche at 6.0%, a CNY0.89 billion 4-year tranche at 6.98%, and a CNY0.8 billion high-yield tranche with no fixed coupon. Dynast Property Investment Holdings issued multi-tranche asset-backed securities comprising a US$232 million 3-year tranche priced at 200 bps over the 3-month LIBOR, a US$58 million 3-year tranche priced at 250 bps over LIBOR, and a US$72 million tranche that will be privately placed.

*     Government bond yields fell last week for most tenors in Viet Nam, and rose for most tenors in Hong Kong, China; Indonesia; the Republic of Korea; Malaysia; the Philippines; Singapore and Thailand. Yield movements were mixed in the PRC. Yield spreads between 2- and 10- year maturities widened in all emerging East Asian markets except for Malaysia which yield spreads remained unchanged in the past week. 

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