28 Mar 2016
Asian rates: A cherry picking exercise – SocGen
Research Team at Societe Generale, suggests that while the growth outlook in emerging economies remains somewhat soft, a shift lower in Fed tightening expectation has allowed some EM assets to perform.
Key Quotes
“Our view on divergence in Asian rates performances broadly holds up during the recent risk-on trading sessions, as it did when EM sentiment was previously negative. However, risk-reward does not look particularly favourable chasing further risk-on moves.
The Hi-Li (HKD basis) curve is likely to steepen as issuer flows are gradually digested; SGD IRS curve can steepen if sentiment towards the SGD stays stable; the CNY NDIRS and INR NDOIS curves are also biased to steepening on supply risks but the move can be slow while the carry is negative. On the other hand, the TWD and KRW rates curves may remain flat in the near term supported by bond demand.”
Key Quotes
“Our view on divergence in Asian rates performances broadly holds up during the recent risk-on trading sessions, as it did when EM sentiment was previously negative. However, risk-reward does not look particularly favourable chasing further risk-on moves.
The Hi-Li (HKD basis) curve is likely to steepen as issuer flows are gradually digested; SGD IRS curve can steepen if sentiment towards the SGD stays stable; the CNY NDIRS and INR NDOIS curves are also biased to steepening on supply risks but the move can be slow while the carry is negative. On the other hand, the TWD and KRW rates curves may remain flat in the near term supported by bond demand.”