THAILAND: Further BoT Cuts Possible, Market Has Close To One Further Cut Priced
As widely expected the Bank of Thailand cut rates by 25bps late yesterday, taking the policy rate to 1.25%. This is lows in the policy rate back to the start of 2023. Back then we did see rates get as low as 0.50%, as rthe economy grappled with the Covid pandemic. Headlines from the BoT Governor have crossed a short while ago and the central bank is keeping the door ajar for further easing, although the governor stresses that monetary policy space is limited. Market pricing in terms of the 1yr outlook has an implied rate of close to 1.06%, so close to another full 25bps easing priced in (from there onwards the market implied curve steepens).
- The BoT Governor also noted that low growth is the new normal for Thailand and efforts need to be made to boost loans and investment (via RTRS).
- The chart below plots the long term trends of the policy rate and Thailand GDP y/y growth, note that the policy rate is the white line and inverted on the chart. Easings undertaken to date haven't aided the growth backdrop, although lags can clearly be a factor. Still, the consensus forecast for Thailand GDP growth next year is 1.8%, versus and expected +2.1% for 2025.
- Generally depressed local confidence levels, uncertainty around external demand, stronger baht levels etc, remain headwinds from a growth standpoint.
- We also have an election to be held on Feb 8 next year, which may also keep some business activity on the sidelines as the election outcome is awaited.
Fig 1: Thailand GDP Y/Y & BoT Policy Rate (Inverted)
Source: Bloomberg Finance L.P./MNI
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JGBS: Long-End Remains Pressured At Lunch Ahead Of PM/BOJ Meeting
At the Tokyo lunch break, JGB futures are weaker, -9 compared to settlement levels.
- "Japanese Prime Minister Sanae Takaichi is set to meet with Bank of Japan Governor Kazuo Ueda on Tuesday as she mulls support for an economy that shrank over the summer. The two will meet at 3:30 p.m. in Tokyo, according to the prime minister's office. The meeting comes after a report showed the Japanese economy contracted in the three months through September on a US tariff-linked slump in exports and a sharp drop in property buying." - BBG
- Cash US tsys are 1-2bps richer, with a steepening bias, in today's Asia-Pac session.
- Cash JGBs are 1bp richer to 5bps cheaper across benchmarks, with a steeper curve. The benchmark 20-year yield is 3.4bps higher at 2.785%, a fresh cycle high, ahead of tomorrow's supply. (see chart)
- The 20-year JGB is at a similar valuation to last month in terms of the 10/20/30 butterfly.
- Swaps have twist-steepened, with rates 1bp lower to 5bps higher.
Source: Bloomberg Finance LP
CRYPTO: Bitcoin - Breaks Overnight Lows & Is Looking To Test The $90k Support
Bitcoin continues to trade very heavy in the Asian session, breaking the overnight lows and now having a look toward the pivotal $90k area. If this break is sustained it could signal an even deeper pullback toward the $65k-$75k area. {XBTUSD Curncy}
Fig 1: Bitcoin spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: Richer With Risk-Off, 2026 OIS Softens Slightly After RBA Minutes
ACGBs (YM +2.5 & XM +2.0) are modestly richer after the release of RBA Minutes.
- Cash US tsys are 1-2bps richer, with a steepening bias, in today’s Asia-Pac session as risk-assets fall.
- Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +32bps.
- The November meeting minutes reiterated that the RBA’s central scenario is “in balance” with risks to both the downside and upside. How these risks will develop is likely to determine whether monetary policy stays on hold or rates are cut further and while it is “not yet possible to be confident” about which scenario will materialise, the Board will “remain cautious and data dependent”. With core inflation above target and ongoing signs of a recovery in demand, policy is likely to be on hold in December and into early 2026, depending on the data.
- RBA-dated OIS pricing is slightly softer today, showing a 25bp rate cut in December at a 2% probability, with a cumulative 12bps of easing priced by mid-2026.
- The bills strip has bull-flattened, with pricing +1 to +3.
Source: Bloomberg Finance LP / MNI
