FW: RHB FIC Rates & FX Market Update - 12/2/15

12 February 2015

Rates & FX Market Update

EGBs Mixed as Investors Continue to Digest Greek Uncertainty; Asian Currencies Extended Losses; BSP Expected to Stand Pat

Highlights

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¨    Strong offshore interest at yesterday’s 10y UST auction with indirect bids at over 59.5%, the highest in three years, and garnering a BTC of 2.62x versus 2.61x in the previous auction in January; the average yield came in at 1.970%, up 8bps from the previous auction. As such, we expect the 30y auction to garner similar demand as our valuations place USTs well below similar rated sovereigns. Eurozone bonds were mostly mixed as talks between Greek officials and EU partners failed to reach an agreement; Investors appears to have limited their duration exposure on EGBs amid Greek uncertainty alongside heightened risk of deflation. We reiterate our mild overweight stance among peripheral EGBs particularly BTPs and SPGBs ahead of ECB’s QE implementation in March. AUDUSD was pressured lower on declining oil prices; expect ACGB yields and AUDUSD to trend lower following disappointing jobs data in January, fueling sentiment for additional easing by RBA.  

¨    Yields on ThaiGBs edged higher as BoT’s meeting minutes revealed little new insights, asserting that the current policy rate remains accommodative. Nonetheless, dovish tilt form dissenters are likely to keep yields on ThaiGBs subdued. Separately, Philippines BSP is expected to stand pat given easing price pressures. In Inida, INR extended losses overnight against a resilient USD as markets continued to digest Modi’s loss at the Delhi State elections; expect further upside pressures to the pair should IP number disappoint while expectations for a higher CPI print in India is likely to pressure GSec yields higher.

¨    USDKRW edged higher towards its 1101.1 resistance level, as it continues to take directional cues from the softer JPY. We are likely to see the KRW trade firm ahead of the BoK meeting next week as South Korea’s Finance Minister, Choi steers his focus towards structural reforms, lifting pressures off BoK to ease monetary policy to boost the economy amid efforts to mitigate the elevated household debt.

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