US CPI will be the data highlight this week along with US activity data. Inflation and growth data also due in China, and the 1yr MLF rate fixing is due Friday. ECB policy decision due Thursday.
Ongoing government and corporate supply, together with FOMC hawkishness, weighed on US treasuries. The 5yr led the move lower, hitting 4.465%, while 10yrs hit 4.326. Technically watch the 30yr, which will probably lead the move down (in price). It has tested 4.42% before backing off, and needs a couple more attempts before breaking through.
Today we have Japan M2 and machinery orders for August. Worth noting that 10yr JGB yields are at 0.7%, for the first time since 2014. BOJ Governor Kazuo Ueda was reported as saying that The BoJ will have enough information by year-end to judge if wages will continue to rise, a condition for adjusting stimulus.
This week's ECB meeting could result in an uncertain pause, keeping the deposit rate at 3.75%, but several members of the Governing Council advocate hiking to 4.00%, and given the speculation over the peak in US rates the ECB cannot afford for a pause to be interpreted as an inflection point. Watch the rhetoric.
HK’s Friday deluge has led to an illiquid market this morning. which was weighed on by ETF selling. China IG widened 1-3bps. Non-China IG names were pretty much unchanged. The catalyst for HK IG weakness was the equity market, New World down 5.5% and SHK down 7%. New World Development Perp gave back 5 points, which is 0.382% of the upward surge in the last two weeks, a technical Fibonacci support level.
Hong Kong Land Securities slid 2 points, as did Bank of East Asia. Li & Fung, the supply chain management services company, held in well despite Moody’s changing their outlook to negative on Friday. LIFUNG 5 08/18/25 were unchanged. On the HK new issue front FWD Group (Baa2/BBB) has issued a mandate for a 10yr senior unsecured note.
A team from the International Monetary Fund is due to visit Sri Lanka from Thursday until Sept. 27, assessing the bankrupt South Asian island's progress in implementing a nearly $3 billion bailout deal agreed earlier this year. This is the first review of the arrangement and, if all goes well, it would allow the country to unlock another disbursement. The country is working to pull itself out of a crisis that last year resulted in a default on foreign debt and the resignation of then-President Gotabaya Rajapaksa amid massive protests.
In August, Mongolia inflation accelerated to 10% year-on-year, up from July's two-year low of 9.2%, as reported by the National Statistics Office. A significant driver of this surge was the food and non-alcoholic beverages sector, which saw a 16.4% year-on-year price increase, adding 4.5 percentage points to the overall inflation figure. Additionally, the costs associated with restaurants and hotels grew by 16.8%, contributing a further 0.5 percentage points. Import-related expenses also played a role, adding 3.5 percentage points to the August inflation rate. A breakdown reveals a 16.1% increase in nationwide food prices and a 7.6% hike in non-food items. Concurrently, the prices for goods across the nation rose by 10.7%, while the cost of services climbed 7.9%.
Pakistan’s interim government, facing public discontent over escalating living expenses, anticipates holding both federal and provincial elections within the next four months. Caretaker Prime Minister Anwaar-ul-Haq Kakar, addressing Dawn News English, stated that the elections, originally slated for November, have been deferred due to the election commission's request to modify constituencies in line with population growth over the past six years. This delay might provide an electoral advantage to Shehbaz Sharif and his allies, especially after Imran Khan, their primary opponent, was recently incarcerated. Khan, nonetheless, maintains significant public support, as evident from a recent opinion poll. The potential extension of elections to February might also allow the Kakar administration time to implement the International Monetary Fund's required reforms for further bailout fund releases. Amid historical political instability and current economic challenges, the caretaker government seeks to initiate the divestment of unprofitable state enterprises and attract investments from two Gulf countries across multiple sectors.
Philippines central bank reported a slight decline in foreign exchange reserves by 0.15% in August, settling at $99.81 billion compared to the $99.95 billion recorded in the previous month. It should be noted that the central bank's computation of these reserves comprised of gold holdings, foreign currency, and foreign-denominated securities.
Indonesia’s country’s legislators have called on Bank Indonesia (BI) to judiciously lower borrowing costs, notwithstanding the Federal Reserve's sustained higher interest rate trajectory. Said Abdullah, the head of the parliament’s budget committee, emphasized Indonesia's economic resilience and contended that BI has room to set its policy rate below that of the US. He advocated for a "more moderate" BI rate to stimulate business investments, especially with the upcoming elections presenting a potential growth opportunity beyond the projected 5.2%. While Bank Indonesia maintained the seven-day reverse repurchase rate at a four-year peak of 5.75% since February, there are concerns about the rupiah's recent 3% depreciation due to capital outflows. Nonetheless, Abdullah expressed confidence in the central bank's capacity to stabilize the currency, referencing a significant inflow of $277.3 million into its foreign-currency deposits and underscoring Indonesia's robust export performance.