18 April 2017
Rates & FX Market Update
Easing Safe Haven Flows Halted
Declines in UST Yields
Highlights
¨ Global
Markets: Risk assets appeared to have found a stable footing overnight, as
the DXY index rebounded after touching the 100 level intraday given receding
safe haven flows, although still slightly softer versus last Friday’s closing;
10y UST yields rebounded to 2.25% after temporarily dipping below 2.20%
intraday. With European markets closed for the Easter holidays, Treasury
Secretary Mnuchin’s comment that USD strength is a long-term positive
appeared to support the dollar’s rebound overnight, although we remain relatively
cautious this week given North Korea’s escalating threats and the upcoming
French election; stay neutral USD.
¨ AxJ
Markets: Plethora of Chinese data due overnight were indicative of a strong
start to Year 2017 ahead of the leadership transition, with 1Q17 GDP printing
at 6.9% y-o-y (consensus and 4Q16: 6.8%), alongside better-than-expected Retail
Sales, Industrial Production and FAI given strong TSF growth in the preceding
months. 10y CGB yields climbed c.5bps overnight on stronger expectations that PBoC
will remain committed to slow the pace of credit growth this year, although
we recommend a neutral CGB stance given prospects of the bonds being included
in global bond indices. Elsewhere, strong Singapore’s March NODX print
(16.5% y-o-y; consensus: 7.3%) once again bolstered growth optimism for the
export-dependent nation, with the bulk of the outperformance attributed to
non-electronic exports. However, outlook for domestic sectors remain
relatively lacklustre, which is likely to keep MAS on the side of caution; stay
neutral SGD. Likewise, Indonesian trade data remained robust in March
(exports +23.6% y-o-y; imports +18.2% y-o-y), in line with strength seen in
regional peers and partially bolstered by y-o-y gains in broad commodity
prices. USDIDR was relatively stable overnight under the 13,300 level, where
we remain confident for BI to maintain the current stability and currency’s
conduciveness; stay neutral IDR.
¨ The
EURUSD pair climbed 0.33% overnight ahead of the 1st round of French
presidential election this Sunday. Polls are currently indicating a close 4-way
fight, where we opine for a Le Pen – Melenchon pairing in the runoff round
likely be the worst outcome for risk sentiment given their anti-EU policies.
The most risk-positive outcome is likely to be a Macron – Fillon runoff in the
2nd round; stay mildly bearish EUR over the near term.
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