汇丰银行-亚太地区-宏观策略-亚太利率：悄然降息-2019.2.14-35页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Research at:https:/ THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES REPUBLIC OF CHINA(THE PRC)(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)Receive CNY5yr NDIRS:Positioning for further easing INR5-2yr NDOIS steepener:The combination of monetary easing and fiscal slippage Rec AUD-NZD5yr5yr IRS spread:Weaker AU growth outlook The Peoples Bank of China eased first and now,the Reserve Bank of India has followed.Even the Reserve Bank of Australia has changed tack,with the governor suggesting that lower rates may be appropriate if the labour market softens.Indeed,Australias economic data has been evidently weaker than New Zealand.We recommend receiving AUD-NZD5yr5yr IRS spread,positioning for a reversal of the spread widening seen over the last two years.Our bullish view on China rates remains firm and the consumer spending data during the Lunar New Year period only reaffirmed the conviction.We stay received CNY5yr NDIRS and long 10yr bonds,awaiting bolder policy action.Outright plays in India rates are unappealing,in our view,given the opposing forces of monetary easing and fiscal slippage.Positioning for curve steepening via INR5-2yr NDOIS steepener is more prudent.Despite the creeping dovish shift in the region,there are still central banks,such as the Bank of Thailand and Bank of Korea,holding firm to a slightly hawkish stance.We are not inclined to pay rates as incoming data has been weaker,not stronger.Yet,we acknowledge that it may take more to convince these central banks to strike a more neutral tone.For now,we retain the box trade of positioning for curve steepening in Thailand relative to Korea,to express the view that global macro concerns tend to be reflected much faster in Korea rates than Thai rates.Table 1:HSBC market views Country 5-year yield/rate 2s/5s curve Overall conviction China Lower Flattening Bullish Hong Kong Higher Flattening Mildly Bearish Singapore Lower Steepening Mildly Bullish Korea Neutral Neutral Neutral Malaysia Lower Neutral Mildly Bullish Thailand Neutral Steepening Neutral Philippines*Neutral Neutral Neutral India Higher Steepening Mildly Bearish l Indonesia Lower Neutral Mildly Bullish Australia Neutral Flattening Neutral New Zealand Neutral Neutral Mildly Bearish Japan Neutral Neutral Neutral Notes:IRS curve unless otherwise specified.*Government curve.Source:HSBC 14 February 2019 Andre de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 2217 Pin Ru Tan Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited,Singapore Branch .sg+65 6658 8782 Dayeon Hong Asia Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 2996 6569 Himanshu Malik,CFA Asia-Pacific Rates Strategist The Hongkong and Shanghai Banking Corporation Limited .hk+852 3941 7006 Tom Nash,CFA Strategist HSBC Bank Australia Limited .au+61 2 9084 2433 Zoe Fang Associate,Asia-Pacific Rates Strategy The Hongkong and Shanghai Banking Corporation Limited .hk+852 2822 4665 Asia-Pacific Rates FIXED INCOME RATES Sneaking in rate cuts BearishBullish FIXED INCOME RATES 14 February 2019 2 Top trades Table 2.New strategies Entry date Entry level Target Stop Current P&L Rationale Pay Rec New Zealand NZD5yr5yr IRS Australia AUD5yr5yr IRS 7-Feb-19 13bp 38bp 0bp 19bp+6bp Rationale:Relative macro mix;higher rate sensitivity in Australia.Risks:Compression trades continue to be popular Buy Sell Japan 10bp OTM JPY3mX10Y payer swaption ATM JPY3mX2Y payer swaption 1-Feb-19 7 cents 40 cents-10 cents 9 cents+2 cents Rationale:JPY curve appears too flat.Risks:Further flattening of JPY swap curve led by the front-end Source:HSBC Note:Options may result in greater losses than equivalent trades should the market move against ones expected direction Table 3.Review of positions opened in previous publications Instrument Entry date Entry level Target Stop Current P&L Rationale Long Malaysia MGS3.733 Jun28 21-Jan-19 4.07%3.9%4.20%3.96%+11bp Rationale:Rebound in oil prices;cheap valuations versus the rest of maturity segment.Risks:Any slippage to fiscal consolidation plan Rec Singapore SGD5yr IRS 21-Jan-19 2.07%1.80%2.20%2.03%+4bp Rationale:Sufficient liquidity in the market.Risks:Currency weakness Thailand THB5-2yr NDIRS steepener Korea KRW5-2yr NDIRS flattener 21-Jan-19 19bp 40bp 5bp 20bp+1bp Rationale:Thailand curve is unlikely to invert with increasing duration of outstanding bonds.Risks:Lower US rates or sudden switch in monetary policy stance by Bank of Thailand Buy Sell Australia TCV3 Oct28 ACGB2.75 Nov28 17-Jan-19 46.5bp 34bp 52bp 42bp+4bp Rationale:Attractive valuations and supply factors.Risks:Deterioration in state revenue outlook Pay Rec India 5yr INR ND OIS 2yr INR ND OIS 11-Dec-18 8bp 40bp 0bp 9bp+1bp Rationale:Long-dated ND OIS rates need to reflect higher risk premium;intensifying expectations of policy accommodation.Risks:Further policy tightening.Rec Pay Offshore China CCS3yr IRS CCS2yr IRS 21-Nov-18 2bp-20bp 10bp 8bp-6bp Rationale:Seasonal pressure on the renminbi.Risks:The end of the global USD rally.Long Indonesia IndoGB5.625 May23 3-Oct-18 8.00%7.20%8.50%7.72%+28bp Rationale:BI is near the end of the tightening cycle and rate cuts possible in 2019.Risks:Global risk asset sell-off.Rec Japan USDJPY 3yr basis 27-Sep-18-39bp-55bp-30bp-40bp+1bp Rationale:Increase in Samurai bond related liability hedging.Risks:An indication of departure from ultra-loose monetary policy by the BoJ Rec China CNY5yr NDIRS 18-Apr-18 3.55%2.30%3.00%2.77%+78bp Rationale:Slower economic growth,and more monetary easing.Risk:Large fiscal stimulus.Buy China 10yr CGBs 14-Mar-18 3.86%2.70%3.40%3.08%+78bp Rationale:Slower economic growth and slower pace of financial deleveraging.Risks:Currency weakness or higher US rates.Open:Unrealised P&L:+206bp Closed:Realised P&L*+58bp Aggregate:Total P&L+264bp*Total P&L on closed positions since December 2018.Source:HSBC.Note:Options may result in greater losses than equivalent trades should the market move against ones expected direction 3 FIXED INCOME RATES 14 February 2019 It may seem an exaggeration to suggest that there is a race for rate cuts across Asia Pacific but the direction of policy is increasingly clear.The market is already beginning to shift to price in a collective easing bias,led in particular by China and India(Figure 1).Aside from the PBoCs 100bp RRR cuts in January,which follows on from the easing trend last year,the first out of the block so far this year to reverse the tightening course of 2018 has been the Reserve Bank of India with an unexpected rate cut and the prospect of another as soon as April(India:RBI eases,more to come,7 February 2019).This would represent a reversal of the two rate hikes delivered in June and August 2018,when EM sentiment was adversely affected by external factors,in particular the Feds tightening.Bring that forward to this year,the prospect of a protracted Fed pause and even an end in sight to quantitative tightening are providing policy relief in Asia.Moreover,economic activity and inflation are softening across the region(Asia Economics Quarterly,4 January 2019).Although it is noteworthy that core inflation remains elevated at 5.4%in India.Those that have a tightening bias,such as the Bank of Korea and Bank of Thailand,may have to reconsider.With inflation fleeting with the central banks target of 2%in Korea and nudging up to the bottom of the inflation band of 1-4%in Thailand as recently as Q4 2018,both countries have since seen prices decelerate sharply to only 0.8%yoy and 0.3%yoy,respectively.Lead indicators including economic activity suggests that there are further disinflation pressures which also resonates with major developed countries and China.The Thai Baht has also appreciated the most versus Asia peers year-to-date,which is another factor that limits room to manoeuvre for any further policy normalisation.The 6-month THB fix is already close to the policy rate,in part also driven by increased T-bill sales and pressure might return to 2017 policy tools to alleviate FX appreciation Key direction Regional central banks are tilting more dovishly Easing expectations should rise further,though the pace of actual easing is likely to vary significantly China and India to lead the pack Andr de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited +852 2822 2217 Figure 1.Easing bias reflected across APAC Figure 2.Strong disinflation impulses return Source:Bloomberg,HSBC*For CNY,1Y1Y IRS 1Y IRS is used as a proxy Source:Bloomberg,HSBC The prospect of a protracted Fed pause and even an end in sight to quantitative tightening are providing policy relief in Asia-100-50050100150200250300AUDNZDINRMYRKRWCNY*Max(-6mts)Min (-6mts)Current12m implied policy rate change(bp)012345678Jan-18Apr-18Jul-18Oct-18Jan-19CPI(%y-o-y)KRWTHBMYRINRIDRPHP FIXED INCOME RATES 14 February 2019 4 pressure.All things being equal,this could result in the 6-month THB fix trading well below the policy rate regardless of the prospect of a rate cut.In Korea,according to the FRA-CD curve,the market is already pricing in a 36%chance of a 25bp rate cut by BoK within nine months.We therefore prefer to maintain THB5-2yr NDIRS steepener against KRW5-2yr NDIRS flattener.The Peoples Bank of China has been charting its own course of policy easing,irrespective of the Fed,for over 12 months now and we have been consistently positioning for a further increase in liquidity provisions and lower China rates.Rather than recommend any corresponding curve trade,even if we see the prospect of an acceleration of monetary easing,we have greater conviction for our well-established receive CNY5yr NDIRS and long 10yr China government Bonds(Figure 3).In contrast,we advocate INR5-2yr NDOIS steepener not just because there is a good chance of a back-to-back reduction in the RBIs repo rate but with core inflation remaining sticky,a deteriorating fiscal outlook and rising bond supply are likely to lead to a higher risk premium in long-dated INR rates.After prudently raising rates by 175bp last year,the case for Bank Indonesia to remove some of this tightening as external pressures ebb should be more compelling,considering that inflation has remained subdued(page 3,Figure 2).Price pressures,in particular food,have been well contained by effective supply-side management.We maintain a preference for 5yr IndoGBs with the interest rate cycle already peaked and even chances of policy easing.Encouragingly,despite a rapid fall in inflation in the Philippines,the Bangko Sentral ng Pilipinas has so far refrained from cutting its RRR.We do though envisage a series of RRR cuts to materialise and HSBC Economics expects a 100bp cut in Q2.The local government bond market has already rallied significantly,especially versus regional peers.It is therefore difficult to chase yields lower and we adopt a neutral stance(page 15).In a similar vein to the Fed,the market is ahead of the Reserve Bank of Australia in terms of pricing in rate cuts.The OIS market reflects 21bp of rate cuts over the next 12 months(Figure 4).The RBA governor,Philip Lowe,has very recently shifted to a neutral stance compared with previous language that the next move in the cash rate is likely to be higher.That said,versus New Zealand we have a preference for the long-end of Australian rates curve(see below).The market pricing of rate cuts in New Zealand has begun to normalise as the Reserve Bank of New Zealand pushed out its forecast for policy rate hikes to early 2021 at the latest MPC meeting.Market implied policy rates however are still indicating 12bp of easing over the next 12 months(Figure 4).Arguably the compression in NZD rates is now overdone though especially the long-end on a relative basis vs peers.10yr New Zealand government yields have already dropped to record lows.We recommend paying NZD IRS 5yr5yr vs receiving AUD IRS 5yr5yr(page 20).Figure 3.The prospect of an acceleration of monetary easing in China set to drag yields lower Figure 4.Monetary policy easing expectations in Australia and New Zealand Source:Bloomberg,HSBC Source:Bloomberg,HSBC 2.22.63.03.43.84.2Jan-17Jul-17Jan-18Jul-18Jan-19Jul-19%China 7-day repo fixing(3m moving average)10yr CGBCNY 5yr NDIRSHSBC projections0.000.250.500.751.001.251.501.752.00Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Implied yield(%)AUDNZDRBNZ official cash rate RBA official cash rate 5 FIXED INCOME RATES 14 February 2019 It is looking like early 2016 again.Asian currencies on an average are up against the USD by more than 1%(as of 1 Feb),as Fed chooses a dovish path and other concerns,in particular RMB depreciation fears,had abated.Investors have also been using valuation arguments(overvalued USD,undervalued Asian assets)to justify their risk appetite.But history often only rhymes rather than repeats the critical differences today are that US rates(the hurdle rate)are much higher,the US economy is in the late-stage of its cycle,and Asias exports growth have peaked(maturing tech cycle).January PMIs across the region pointed to further contraction-six of the seven most closely followed economies in the region(India was the exception)declined further and were mostly below 50.These distinctions suggest that the Asian FX rally is probably more fragile in 2019 than it was in 2016(see Asian FX Focus:2019 Outlook:No sweet sixteen,10 January 2019).The sharp appreciation in the DXY on the back of the US Presidential election outcome derailed the Asian FX rally in late 2016.This time around,we see three plausible catalysts that could spoil the party.First,the failure of US and China to come to a lasting and meaningful trade agreement.China and the US ended their latest round of talks(on 30/31 January)in Washington DC,with statements from both sides indicating that more progress has been made.US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are due to visit Beijing in mid-February to hold another round of trade talks.Both sides have to reach some sort of agreement by 1 March,or the US will raise the tariff rate on USD200bn of Chinese imports from 10%to 25%.If so,USD-RMB could break above 7.00.The second risk is also China-related.Chinas economy is facing cyclical headwinds.More fiscal stimulus and monetary policy easing appears imminent,at this juncture.If Chinas stimulus measures are not able to shore up growth by,say,the middle of the year,some investors may think that the authorities are running out of policy ammunition or that the economys structural debt problems have become too significant.The fears