ASIA: Inflation Green Shoots Could See Rates on Hold for Near Term (Part 2)
Nov-12 03:49
- Bond markets in the region have moved to price out cuts, yet the potential for further moves remains. In Korea and Malaysia we assess the 3-Yr (due to the presence of a bond future) versus the bas rate and the premium over the base rate. For Indonesia we use the 2-Yr.
- What we found is that since the mid part of 2025, the premium over has been increasing. A sign that can be interpreted as the bond market starting to question further rate cuts.
- During the mid part of this year this relationship was negative in Korea, but has moved to +33bps, pricing out cuts and suggesting the BOK is on hold for some time. When considering the last time the BOK was on hold for an extended period in mid 2023, this spread traded around +60bps for some time.
- In Indonesia, the premium over currently is +9bps yet in the period in late 2023, this relationship above +70bps.
- In Malaysia, the period in early 2024 when the BNM was on hold for an extended period saw this relationship get to +65bps whereas today it stands at +40bps
The analysis when added to Part 1 of "Inflation Green Shoots Could See Rates on Hold for Near Term" suggests that if inflation continues to increase at the pace it has been increasing, and BOK, BI and BNM are on hold for an extended period, short end rates have room to move higher from today's levels.
Fig 1: 2-Yr and 3-Yr Government Bond Yield Premium Over the Base Rate
source: Bloomberg Finance LP / MNI
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CHINA: September Exports Surge (Ex US) as Trade War Intensifies
Oct-13 03:18
- The moderation of exports in August was short-lived as September's numbers jumped +8.3% YoY, beating expectations and much stronger than the month prior.
- According to BBG estimates, the decline in exports to the US was significant, down -27% YoY. This points to the growth of demand from non US markets, arguably weakening the US's position in a trade war. Exports to Africa, India and other Asian nations are soaring with the latter back to pre-COVID levels.
- US President Donald Trump had threatened to raise tariffs on China and withdraw from a high-profile upcoming meeting with Chinese President Xi Jinping, in a lengthy statement on Truth Social, citing a letter from Beijing which he claims lays out new rare earth export control measures.
- The new Chinese rare earth export control measures are scheduled to take effect on December 1. Starting November 8, Beijing will also restrict exports of equipment needed to manufacture batteries for electric cars in a bid to protect the competitiveness of Chinese autos, per The New York Times.
- Imports climbed +7.4% in September for it's largest monthly expansion since April 2024. Despite being a crude indicator for domestic demand, the result nevertheless comes a an invaluable time as the US rhetoric ramps up.
- Along with the decline in exports to the US, imports from the US declined -16.1%, widening the trade surplus with the US to $22.bn.
- Whilst this data captures a period before the weekend's escalation it may slightly strengthen Beijing's position in negotiations, given the ever growing decline in the US's importance to China's trade outcome.
MNI: CHINA YTD EXPORTS +7.1% Y/Y IN YUAN TERM: CUSTOMS
Oct-13 03:07
- CHINA YTD EXPORTS +7.1% Y/Y IN YUAN TERM: CUSTOMS
- CHINA YTD IMPORTS -0.2% Y/Y IN YUAN TERM: CUSTOMS
- CHINA YTD TRADE SURPLUS +CNY6.28 TRLN: CUSTOMS
MNI: CHINA SEP EXPORTS +8.3% Y/Y VS MEDIAN +6.5% Y/Y: CUSTOMS
Oct-13 03:06
- CHINA SEP EXPORTS +8.3% Y/Y VS MEDIAN +6.5% Y/Y: CUSTOMS
- CHINA SEP IMPORTS +7.4% Y/Y VS MEDIAN +1.8% Y/Y: CUSTOMS
- CHINA SEP TRADE SURPLUS +$90.45 BLN VS MEDIAN +$98.2 BLN
