THAILAND: BoT Hold Surprises But About Timing, Retains Easing Bias
The Bank of Thailand (BoT) surprised by leaving rates at 1.5% but Wednesday’s decision wasn’t unanimous with two MPC members voting for a 25bp cut. BoT’s new Governor Vitai’s previous comments and weak activity and inflation since the August meeting had driven consensus to expect policy easing. Given rates were cut at the last meeting and they are low, it appears that the MPC was concerned about retaining its limited policy space and felt that it could wait to allow previous easing to feed through.
- Given growth is expected to slow into 2026 and inflation remains below the band further easing is likely but will depend on the impact of fiscal support to households due by year end.
- The October decision seems to be about timing as the MPC believes policy should remain accommodative as growth needs support. It will continue to monitor risks and “macro-financial developments”.
- Its assessment of the economy was similar to August’s with the MPC saying it is “projected to expand in 2025 and 2026 close to previous assessment” with growth slowing in H2 2025. It expects growth of 2.2% and 1.6% in 2025 and 2026 respectively.
- BoT will monitor the progress of recently agreed government disbursements, impact of US tariffs and SMEs given competition, high financing costs and limited credit access.
- The MPC is aware of deflationary risks but reiterates that outside of “supply-side factors” most goods and services inflation is positive. It expects core inflation to remain below the 1-3% band at 0.9% in 2025 and 2026.
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LNG: Gas Prices Higher As More Sanctions On Russia Considered
Gas prices were higher on Monday with Europe up 3.6% to EUR 33.11, close to the intraday peak. They are now 4.7% higher this month. The EU is looking at further sanctions on Russian banks and energy. To be effective they need the support of the US and President Trump said on Sunday that he is also prepared to impose new restrictions. The intensity of Russian strikes on Ukraine has increased this year with the worst last weekend. EU leaders are expected to go to Washington early this week.
- Gazprom agreed to build another pipeline to Russia. In addition, China appears to be importing gas from the US sanctioned Arctic LNG 2 facility. Total China LNG imports rose 1% y/y in August.
- US gas rose 1.6% to $3.098 after a high of $3.198. It is now up 3.4% in September. Prices have been supported by flows being impacted by pipeline maintenance, which has been extended a week to 15 September, as well as forecasts for warmer weather mid-month.
US TSYS: Cash Open
TYZ5 is trading 113-18, up 0-00+ from its close.
- The US 2-year yield opens around 3.488%, down 0.03 from its close.
- The US 10-year yield opens around 4.042%, down 0.01 from its close.
- MNI US DATA: NY Fed Consumer Survey: Inflation Expectations Looking Stubborn. The New York Fed's Survey of Consumer Expectations leaned in a stag-flationary direction in August, showing both an uptick in short-term inflation expectations and increasing pessimism on the labor market front. Overall the deterioration in the labor market outlook is likely to be the main takeaway from the FOMC going into its meeting next week, stubborn inflation expectations are unlikely to be ignored, illustrative of the Fed's current policy dilemma.
- Upcoming issuance: September’s issuance schedule is set to see $315B in nominal Treasury coupon sales (unch from the equivalent month in the previous quarter), in addition to $19B in 10Y TIPS (up $1B from prior) and $28B FRN (unch) for a total of $362B.
- Sales for the month start today with $58B of 3Y Note, Wednesday Sep 10 with $39B of 10Y Note reopen, and Thursday Sep 11 with $22B of 30Y Bond reopen.
- 10-Year Yields have broken through its support as the market reacts to a labour market that is rapidly cooling. This move should now see buyers return on bounces with the first buy-zone between 4.15%-4.20%. First target the 4.00% zone then the 3.80% area.
- Data/Events: NFIB Small Business Optimism, Prelim. Benchmark Payrolls Revision
JGBS: Futures Higher, But JGB Curve Remains Steep, Bucking US Trend
JGB futures got to 138.17, +.13 versus settlement levels post the Tokyo close on Monday. The general positive tone to global futures helped sentiment in this space, although JGB futures remain off Friday highs from last week.
- From a technical standpoint, a bear threat in JGB futures remains present despite the recovery of recent lows, including the rally into the Friday close. A resumption of weakness would signal scope for an extension towards 136.57, a Fibonacci projection. Initial short-term resistance is 139.05, the Aug 4 high. A breach would be a positive development for bulls.
- Until we get greater clarity around the local political outlook, JGBs may lag US Tsy bond gains. The US-JP 10yr government bond yield spread is tracking lower, last at +247bps (although some catch up from 10yr JGB yields may be seen today). We were around +263bps at the end of Aug.
- Via BBG: " Sanae Takaichi, who is polling at 23% nationally according to a Nikkei survey but has weaker backing within the Liberal Democratic Party" is in favor fiscal and monetary policy easing, while "Shinjiro Koizumi is polling 22% nationally, but is the clear party favorite with support at 32% among LDP members. " (Koizumi sits more hawkish relative to Takaichi).
- In the cash JGB space, the 10yr yield finished up at 1.57% yesterday, while the 2/30s JGB curve finished up at +245bps, around the May highs.
- Todya on the data front, Aug money stock figures are out, along with Aug machine tool orders.
