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Bond Market Insights - Wed, 25 Jan 2023

China, HK and Taiwan are still closed for the Lunar New Year celebrations, so volumes were muted. Spreads on Asia credit were unchanged to 1bp wider. There was some short-lived volatility around Aussie CPI release but US treasuries looked to supply in Europe and US and drifted lower, albeit by 2bps. 2-10s settled at -70bps after last nights 2yr auction

JGB’s ended the Tokyo session with the long end being supported by todays Bank of Japan purchases of bonds with 25yr and longer maturities. The yield on the 40yr was slightly lower ahead of its reopening tomorrow. The intermediate sector struggled after 10yr yields reached 0.45%. 10yr swaps closed at a mid-price of 1.05%.

In Australia ACGB’s were buoyed by a soft NZ CPI and then got pummelled by a stronger than expected Aussie CPI for Q4. Bond futures closed down about 15ticks. ANZ is calling for 25bp hikes in February and March, Goldman sees a large inflation overshoot and is looking for a terminal rate of 4.1% by May.

For New Zealand Deutsche is still look for a 75bps hike in February, dependant on employment data next week. Westpac has lowered their call to 50bps in Feb followed by 50bps in April and a pause thereafter. Goldman is sitting on the fence on this one.

In the frontier markets the Pakistan central bank said that the country's international reserves rose by $258 million, reaching $4.6 billion. The liquid foreign reserves stood at $10.4 billion. This represents the first increase in 8 weeks. The central bank's reserves reached $18 billion at the beginning of 2022, but dropped dramatically after the invasion of Ukraine on food and energy price rises. Softening of commodity prices and strong bilateral and multilateral assistance have provided the country with a much-needed respite.

Former president Maithripala Sirisena was found guilty of neglect by the Supreme Court for not taking preventive measures to thwart the terrorist attacks that took place in Easter of 2019. He, along with four senior government officials, failed to act on well-grounded intelligence that showed that an attack was imminent. Asa result of the ruling, he will have to pay compensation to the families of the 279 victims.


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