Most Asian bond markets managed to gain in March 2017 amid a widely expected US Fed rate hike. Indonesian bond market was the top performer while the Philippines and China bond markets were the only 2 markets which fell for the month. The Markit iBoxx ABF Pan-Asia Bond Index rose +0.63% on an unhedged basis, in US dollar terms, and rose +0.17% on a USD hedged basis.
During the month, Chinese bonds edged down by -0.08% in USD terms. March manufacturing Purchasing Managers Index (“PMI”) rose to 51.8. February growth indicators were mixed: Imports (+38.1% Year over year (“YOY”)) surged amid higher commodity prices while exports fell -1.3%. Consumer Price Index (“CPI”) eased to +0.8% YoY but Producer Price Index (“PPI”) rose further to +7.8% against a low base. Meanwhile, both new loans and new total social financing fell due to seasonality. In terms of January-February combined year-over-year readings, industrial production (+6.3%) and FAI (+8.9%) picked up while retail sales (+9.5%) softened.
Hong Kong fixed income market climbed by +0.5% in dollar terms for the month. Carrie Lam was elected as the new Chief Executive for HK. 4Q16 lagging PPI accelerated to +4% YoY and industrial production decline narrowed to -0.8%. March PMI improved to 49.9. February exports surged by +18.2% YoY, led by exports to Asian markets. Finally, February CPI dropped by -0.1% YoY on LNY effect and a high comparison base and unemployment rate stayed at 3.3%.
The Singapore fixed income market rose +0.58% in USD terms. March PMI improved to 51.2 with electronics sector index rising to 51.8. February industrial production increased by +12.6% YoY and Non-oil domestic exports surged +21.5% YoY with electronic shipment jumping +17.2%. January retail sales improved to +2% YoY (same if excluding auto sales). Finally, February headline CPI inched up to +0.7% YoY.
Korean bond market advanced by +0.89% in USD amid continuing won strength. 4Q16 Gross Domestic Product (“GDP”) was revised up to 2.4% YoY. March exports continued double-digit growth (+13.7% YoY) with broad based improvement and February industrial production jumped to +6.6% YoY. Finally, March CPI climbed to +2.2% YoY.
Malaysian bonds rose +0.24% in aggregate. The Bank Negara Malaysia held overnight policy rate at 3% and expected core inflation to increase modestly. January exports continued to see double-digit growth (+13.6% YoY) while industrial production moderated further to +3.5%. February CPI jumped to +4.5% YoY caused by higher transport and food prices.
Thai bonds rose +1.76% in USD led by a stronger baht. The Monetary Policy Committee kept the policy rate unchanged at 1.5% to facilitate the continuation of economic growth. February exports moderated to +0.73% YoY. Meanwhile, March CPI eased +0.76% YoY due to decline in fuel and food prices.
Indonesian bond market jumped by +3.38% in dollar terms. The 10 year government bond yield eased to 7.04% as of 31 March, 2017. Bank Indonesia held interest rates at 4.75% and focus switched from demand to inflation management. February CPI fastened to +3.8% YoY while exports moderated to +11.2% due to decline in shipments of coal and metal ores. On the other hand, the Philippine bonds dropped by -1.67% in USD. The BSP kept policy rate unchanged at 3%. February CPI accelerated to +3.3% YoY and January exports surged by +22.5% YoY.
Source: SSGA, as of 31 March 2017.
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