24 February 2017
Rates & FX Market Update
US Treasury Secretary Hoped to Pass
Tax Reforms by August
Highlights
¨ Global
Markets: US Treasury Secretary Mnuchin dialled back some of President’s Trump
lofty economic and tax reforms, targeting to pass new tax measures by
August, against Trump’s initial promises to unveil them over the coming weeks.
Furthermore, the lack of any protectionist stance helped lift EM and Asian FX
while dampening USD strength; DXY fell 0.37% overnight. UST yields tightened
c.3-4bps overnight, despite a relatively lacklustre 7y auction; we retain our neutral UST call. Additionally,
Secretary Mnuchin also cited his intention to look into the issuances of 50y
and 100y UST to capitalise
on the low yield environment; yields on the very long end of the UST curve
underperformed the curve. German 4Q16 final GDP print was unchanged from the
previous estimate (1.2% y-o-y, NSA), while consumer confidence came in a touch
weaker than expectations (10.0; consensus: 10.1). Core EGB yields were a touch
lower overnight, despite ECB’s Weidmann justifying a possible rate hike in
2019. SPGBs were the underperformers, as the country mandated banks for a new
15y bond via syndicate offering; maintain preference on core EGBs versus peripheral
ones.
¨ AxJ
Markets: Singapore consumer prices ticked higher again in January, with
core CPI advancing to 1.5% y-o-y (consensus: 1.4%; Dec: 1.2%) while headline
CPI jumped to 0.6%, in line with consensus estimate; increases are driven by
oil-related items such as electricity and transportation. SGS gained overnight
ahead of the 10y reopening later today, where stable UST yields and ample
SGD liquidity should support demand for the papers; stay neutral SGS.
¨ USDTHB
ticked 0.11% lower overnight to 34.979, while the pair has been trading within
a tight range of 34.9-35.2 over the past 2 weeks. BoT hinted that the bank may
raise its 2017 economic growth forecast on improving exports and the global
economy, further underscoring our cautiously optimistic view on the THB,
despite the ongoing global uncertainties.
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