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China bonds poll data
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India bonds poll data
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South Korea bonds poll data
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Indonesia bonds poll data
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Thailand bonds poll data
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Malaysia bonds poll data
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Philippines bonds poll data
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Singapore bonds poll data
By Vivek Mishra
BENGALURU, March 25 (Reuters) - Yields on sovereign bonds
across most major Asian economies will fall further over the
coming year, after already being yanked down following emergency
interest rate cuts by central banks to counter the coronavirus
hit, a Reuters poll forecast.
Stock markets have also plummeted amid fears the global
lockdown to contain the virus has tipped the world economy into
a recession from which it will take year to recover.
While central bank rate cuts pushed yields on most major
Asian bonds to historic lows earlier this month, over the past
week traders have dumped sovereign debt for cash, driving a
surge in the other direction.
However, nearly two-thirds of the 12 fixed income
strategists polled by Reuters between March 17-24 who answered
an additional question said that trend was unlikely to continue
much longer, as the recent rise in yields was just a knee-jerk
reaction to the massive amount of fiscal stimulus dead ahead.
"In Asia, the stress has been significant...we are probably
in the acute phase of the global assets sell-off. A considerable
premium has been embedded into Asia rates and it will be eroded
once the fear on COVID-19 eases," said Eugene Leow, rates
strategist at DBS in Singapore.
"I see yields on Asian bonds skewed to the downside over the
coming three to six months."
Indonesia 10-year bond yields were forecast to take the
biggest hit, falling about 160 basis points to 6.76% in a year's
time according to the median forecast, from about 8.32% on
Tuesday.
The already modest outlook for China, India, South Korea,
Indonesia, Thailand, Malaysia and Singapore was downgraded from
a poll taken three months ago.
"With the hit to global private demand, the environment is
likely to be very deflationary," said Freya Beamish, chief Asia
economist at Pantheon in London.
"With this kind of massive real economic shock, the recovery
is likely to be very disappointing in these regions and that is
going to exert downward pressure on yields."
However, some respondents said the fundamental relationship
between interest rates and yields has broken as desperate
traders are dumping government bonds and hoarding cash.
"Asia bonds markets are in a sort of paralysis as more and
more unconventional policies are being unleashed. On the one
hand monetary accommodation should lower bond yields, but on the
other hand fiscal expansion could steepen the yield curve," said
Jennifer Kusuma, senior Asia rates strategist at ANZ in
Singapore.
"In Asia, we still have monetary policy space and we are not
going to see the kind of fiscal stimulus we see in developed
markets. In this scenario, the yield curve should steepen, but
we are very early in the process and don't know what we will see
as we get out of this situation."
GROWTH FORECASTS CHOPPED
A separate poll predicted growth in China, the region's
economic powerhouse, would tumble to 3.5% in the first quarter
year-on-year from the previous quarter's of 6.0%. Some say it
may have even shrunk on a quarterly basis. ECILT/CN
Since then, many economists have chopped their forecasts
further to show either no growth or even a contraction in the
current quarter.
To cushion the economic blow from the coronavirus outbreak,
the People's Bank of China (PBOC) cut the cash that banks must
hold as reserves for the second time this year and lowered the
one-year loan prime rate (LPR), the new benchmark lending gauge
introduced in August, to 4.05%. But China's easing measures have been modest compared with
those taken by other major world central banks.
Economists and fixed income strategists expect more support
from the PBOC over the coming months to get the economy back on
a steadier footing.
Expectations for further easing led strategists to cut
predictions for China's 10-year bond yield, which is now
forecast to fall to 2.63% by end June, compared with 3.15%
expected in the Dec. 19 poll.
It is then forecast to rise slightly to 2.70% by the end of
March next year, around where it was trading on Tuesday.
"We expect China government bond yields will face limited
upside in Q2. The PBOC will likely maintain an easing bias to
help growth counter-cyclically," wrote Zhaopeng Xing, China
markets economist at ANZ in Shanghai.
"However, it will not derail the downtrend in economic
growth and the probability of a V-shaped rebound is low. The
rates market will consequently have less room to rally. We
expect the 10-year yield to average at 2.7% this year."
(For a story on major government bond yields and money
market rates: US/INT )
(Additonal reporting by Tushar Goenka; Editing by Ross Finley
and Alex Richardson)