2 Feb 2016

Asia Weekly Market View

 

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    Weekly Highlights

     

    • On Friday, the Bank of Japan (BoJ) cut the main policy rate from 0.1% to -0.1% on bank excess reserves (starting on February 16) and joining the ECB in operating a negative interest rate policy. Japan Government Bond (JGB) yields hit a record lows: 10 year down to 0.135% and 5 year down to -0.045%. The Japanese yen also fell 2% against USD and 1% vs the Euro.
    • The BoJ cut ignited a rally in Asian markets with stronger Asian currencies and lower local bond yields. Asian hard currency credit performed strongly with US Treasury yields moving lower along with modest spread tightening in the investment grade space. We expect this aggressive easing to be a strong tailwind for Asian Fixed Income assets by strengthening foreign bond purchases by Japanese investors.

    • The lower for long scenario for global rates looks set to continue with 10Y US treasury yields now below 2% again. This is a theme not just in DM but in Asia as well: the disinflationary impact from lower commodity prices and easier DM policy creates room for select Asian central banks to ease policy.

    • In our Asian fixed income portfolios, we continue to maintain a bias for hard currency investment grade over high yield (China, Indonesia and India) in light of higher market volatility. Within Asian currencies, we have a balanced positioned in selective mid to higher yielding currencies and are funding it with a basket of lower yielding Asian and DM currencies rather than just the US dollar.

    Country views from the BlackRock Asia Fixed Income Team

    Asia Market Outlook (02 February 2016)

     

     

     

     

     

     

     

     

     

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