汇丰银行-亚太地区-宏观策略-亚太利率：重启宽松-2019.7.18-35页 (2).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:/ Receive CNY5yr NDIRS:Expect 10-15bp OMO rate cuts KRW 1s10s flattener:Carry;two cuts already priced in Pay SGD-USD5yr IRS spread:Negative correlation to NEER The Fed is likely to start its easing cycle on 31 July,and the ECB could tweak its forward guidance on 25 July.Next in line is Asia,where some central banks may finally spring into action.The PBoC has been lowering required reserve ratios over the past year,but the most definitive easing signal rate cuts has yet to come.We like staying receivers of CNY5yr NDIRS and remaining long 30yr CGB,as the PBoC could lower its reverse repo rates once the Fed moves.Bank Indonesia should also ease soon,encouraged by its recent currency strength.We go long 10yr IndoGB.The rally has been sharp over the last month,but there is probably room for the likes of Indonesia and Russia bonds to catch up with Brazils even-sharper rally of late.10yr India and 2yr Philippines bonds remain among our favourites,as easing is set to intensify in both countries.A rate cut is less forthcoming in Thailand,but the central banks reduction of bill supply should push front-end rates much lower,as it did in 2017.Stay receivers of THB1yr IRS.For some time,our portfolio has been overwhelmingly constructed,with outright receive IRS and long bond positions.After the year-to-date rally,valuations are stretched for some countries and,hence,we are adding some relative value trades.For example in Korea,we favour KRW1s10s NDIRS flattener for the carry returns and also because we are of the view that investors have sufficiently priced in two rates cuts before end Q1 2020.In Singapore,a dovish shift in NEER stance is possible in October.We favour paying SGD-USD5yr IRS spread given the negative correlation to SGD NEER during the last easing episode in 2015-18.18 July 2019 Andr 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 Asia-Pac Rates Fixed Income Rates Table 1:HSBC market views Country 5-year yield/rate 2s/5s curve Overall conviction China Lower Flattening Bullish Hong Kong Higher Flattening Neutral Singapore Lower Steepening Neutral Korea Neutral Neutral Neutral Malaysia Neutral Neutral Neutral Thailand Lower Flattening Mildly Bullish Philippines*Lower Steepening Mildly Bullish India Lower Neutral Mildly Bullish Indonesia Lower Neutral Mildly Bullish Australia Neutral Neutral Neutral New Zealand Lower Steepening Mildly Bullish Japan Neutral Neutral Mildly Bullish Notes:IRS curve unless otherwise specified.*Government curve.Source:HSBC Let the easing begin BearishBullish Fixed Income Rates 18 July 2019 2 Top trades Table 2.New strategies Entry date Entry level Target Stop Current P&L Rationale and risks Long Indonesia IndoGB8.25 May29 17-Jul-19 7.13%6.50%7.55%7.12%+0bp Rationale:Increased prospects of monetary easing by BI in 2019.Risk:Global risk asset sell-off Rec Pay Korea KRW10yr NDIRS KRW1yr NDIRS 17-Jul-19-13bp-25bp-5bp-13bp+0bp Rationale:Attractive carry return.Risk:Fair pricing of rate cuts in FRA curve Pay Rec Singapore SGD5yr IRS USD5yr IRS 17-Jul-19-19bp 10bp-30bp-19bp+0bp Rationale:Potentially weaker SGD NEER should lead to wider SGD-USD rates spreads.Risk:Continued SGD NEER strength or sharp sell-off in UST Long Sri Lanka SrilGB11.2 Jul22 17-Jul-19 9.13%8.60%9.50%9.13%+0bp Rationale:Favorable bond supply dynamics and increasing prospects of additional monetary easing.Risk:Upside surprise on inflation Rec Thailand THB1yr IRS 9-Jul-19 1.44%1.25%1.55%1.36%+10bp Rationale:Continued reduction in central bank bill supply could result in lower front-end rates.Risk:Introduction of alternative measures to curb hot money inflows such that the central bank can normalize its bill supply.Long India IGB7.26 Jan29 5-Jul-19 6.68%6.10%6.90%6.33%+35bp Rationale:Supply-related risks premium is likely to be priced out from long-dated yields;increasing prospects of monetary easing.Risk:Higher crude oil prices or increase in food prices.Rec Pay Japan JPY30yr IRS JPY10yr IRS 21-Jun-19 33bp 10bp 45bp 37bp-4bp Rationale:Duration extension activities to intensify amid possibility of additional BoJ stimulus.Risk:Prolonged stealth tapering by the BoJ Source:HSBC Table 3.Review of positions opened in previous publications Instrument Entry date Entry level Target Stop Current P&L Rationale and risks Buy Sell Australia ACGB3 Mar47 ACGB2.75 Apr24 6-Jun-19 100bp 78bp 111bp 102bp-2bp Rationale:Curve steep vs peers;should flatten on yield hunt.Risks:Structural fiscal loosening.Long China 30yr CGB 5-Jun-19 3.88%3.55%4.30%3.83%+5bp Rationale:Slower economic growth and slower pace of financial deleveraging.Risks:Currency weakness or higher US rates.Rec India 1yr1yr INR ND OIS 3-Jun-19 5.61%5.00%5.40%5.13%+48bp Rationale:ND OIS curve likely to reflect more aggressive pricing of policy easing.Risk:Higher crude oil prices or increase in food prices.Rec New Zealand Aug19 OIS 10-May-19 1.42%1.25%1.50%1.29%+13bp Rationale:Dovish RBNZ and global growth concerns.Risks:Rate cut pricing does not materialise Rec China CNY5yr ND IRS 6-May-19 3.09%2.80%3.30%2.84%+25bp Rationale:Renewed concerns around trade tensions,growth and PBoC delivering RRR cuts.Risks:Tax-payment driven liquidity tightness Pay Rec New Zealand NZD5yr IRS NZD2yr IRS 17-Apr-19 16.5bp 40bp 5bp 10bp-7bp Rationale:Dovish RBNZ and low term premium.Risks:Return to bull flattening environment Pay Rec Australia AUD5yr IRS AUD10yr IRS 15-Mar-19 34bp 20bp 41bp 38bp-4bp Rationale:Slope has lagged money market flattening.Risks:Higher global term premium.Long Philippines RPGB4.875 Jun21 13-Mar-19 5.92%4.60%5.30%4.76%+116bp Rationale:Low inflation to spur easing expectations.Risk:Upside surprise on inflation Buy Sell Australia TCV3 Oct28 ACGB2.75 Nov28 17-Jan-19 46.5bp 34bp 52bp 36bp+10bp Rationale:Attractive valuations and supply factors.Risks:Deterioration in state revenue outlook Open:Unrealised P&L:+245bp Closed:Realised P&L*+221bp Aggregate:Total P&L+466bp*Total P&L on closed positions since December 2018 Source:HSBC 3 Fixed Income Rates 18 July 2019 Summer months this year are likely to be more soothing for Asia Rates than last years hot and bothered period of policy tightening(Figure 1).This time around with the Fed poised to cut rates on 31 July and again before year-end(FOMC Preview)there is already a nice breeze of rate cuts by some such as Reserve Bank of India(RBI)and Bangko Sentral ng Pilipinas(BSP)and Bank Negara(BNM),which are due to be joined by Bank of Indonesia(BI)and to a degree Bank of Korea(BoK),Bank of Thailand(BoT).HSBC Economics anticipates another RBI rate cut in August and a further one in Q4,BSP to cut its policy rate in August and additional 100bp cut to the RRR in Q4,BI poised to cut rates totalling 75bp by year end and BoK cutting 25bp in August.Bank Negara Malaysias(BNM)pre-emptive rate cut in May is also set to be followed up by another(eg 25bp in Q4).Bank of Thailand is already embarking on steering effective rates lower via other means,i.e.reduced issuance sizes of central bank bill-measures reminiscent of 2017 but is likely to be complemented by a 25bp cut in Q3.China has already embarked on an easing path via RRR cuts and generous liquidity provisions in the money market system and 7-day repo rate has trended lower as a result(page 3,Figure 1).In anticipation of further RRR cuts(HSBC Economics:100bp)and other policy easing measures by the PBoC we anticipate the 7-day repo fixing to fall to 2.20%by year-end.We have numerous trade recommendations that reflects this easing bias in anticipation that this becomes more entrenched,e.g.receive CNY ND IRS 5yr,receive INR 1yr1yr ND OIS,receive THB 1yr IRS,and long RPGB4.875 Jun21.Key direction More easing in Asia as the Fed kick-starts its easing cycle China,Indonesia,India and Philippines have more room to follow SGD and HKD money market rates could lag the decline in Libor Andr de Silva,CFA Head of Global EM Rates Research The Hongkong and Shanghai Banking Corporation Limited +852 2822 2217 Figure 1.From rate hikes last year to rate cuts this year *Note:Using the 5 day moving average of the 7 day reverse repo fixing rate Source:Bloomberg,HSBC Source:Bloomberg,HSBC There is already a nice breeze of rate cuts by Asian central banks 123456Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19%China*IndonesiaMalaysiaThailandSouth KoreaIndiaPhilippines Fixed Income Rates 18 July 2019 4 In Singapore,the sharp contraction in Q2 GDP has already reinforced widespread expectations of policy easing by the Monetary Authority of Singapore at is next October policy meeting and HSBC Economics expects a 50bp reduction to the SGDNEER slope.This is no time to pay SGD rates outright though despite the inverse link with the implied interest rate of the Singapore Dollar Swap Offer Rate(SOR)which is determined by the spot and forward USD/SGD FX rate(Figure 2).More pivotal are USD Libor is set to decline further,abundant liquidity in Singapore(e.g.falling loan-to-deposit ratios)and foreign capital inflows in Singapore based on other proxies such as Korea.We have though taken profit in our receive SGD 5yr IRS position and there may now be a better case where lower SGD rates lag the US equivalent(page 16).The squeeze higher in Hong Kong interbank Rates also appears to be over(Figure 3).Whilst declining aggregate balance(i.e.sum of balances in clearing accounts maintained by banks with the HKMA)down to USD54bn(vs USD78.5bn in January)has partly contributed,the recent sharp move has been largely driven by anticipated by large IPO related flows which now appear to be postponed.HKD IRS forwards already reflected such a squeeze as temporary anyway making receiving at the front-end quite prohibitive.A more cost effective strategy is to position for a flatter HKD swap curve on a relative basis vs the US,which is zero cost-of-carry for instance on the 5-2yr part of the HKD and USD swap curves(page 17).Whilst it is winter in Australia and New Zealand,respective central bank easing will also provide a warm blanket at least from a rates perspective.The RBNZ has already led the dovish central bank rate cut cycle in May,becoming the first developed market central bank to cut rates.Since then,the RBA has cut twice and both the ECB and the Fed have signalled a strong accommodative monetary policy bias.NZD rates have started to underperform.We see room for NZD rates to play catch-up ahead of the next policy meeting(7 August)and stay net receivers of front-end rates via NZD Aug19 OIS and 2-5Y IRS steepeners(page 20).In Australia,though with monetary policy re-pricing nearing its conclusion our focus has shifted to flattening further out the government curve.The 5-30Y ACGB slope looks particularly steep on a global comparison(page 19).Figure 2.SOR to lag LIBOR in H2 2019 Figure 3.HKD curve to flatten relative to USD Source:Bloomberg,HSBC Source:Bloomberg,HSBC The squeeze higher in Hong Kong interbank Rates also appears to be over In Australia,our focus has shifted to flattening further out the government curve 11.522.53Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19%3m USD Libor6m SOR0.511.522.53Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19%1m Hibor3m Hibor3m USD Libor 5 Fixed Income Rates 18 July 2019 Asian currencies appreciated sharply in the middle of June,and have mostly extended,or at least held onto,those gains up to the first week of July.The appreciation was catalysed by:(1)a resumption of US-China trade talks,which was first hinted at by US President Trump on 18 June where he indicated that he would be meeting China President Xi Jinping at the G20 summit and subsequently confirmed post-G20(with the US putting plans to impose additional tariffs on hold,and China agreeing to buy more agricultural products from the US,while negotiations are ongoing);and(2)a dovish Fed at its 18-19 June meeting.There have been two exceptions to the recent Asian FX resilience so far both the KRW and the RMB have since given up a large chunk of those gains made in the middle of June.The KRW came under renewed pressure in early July as Koreas exports outlook in H2 still looked bleak and market expectations of rate cuts by the Bank of Korea rose after the Finance Ministry lowered its forecasts for growth and inflation.The sudden decision by the Japanese government requiring Japanese companies exporting three types of products to Korea(important inputs for Koreas production of semiconductors and OLED screens)to apply for licenses(which could take up to 90 days)with effect on 4 July also caused some concerns about additional downside risks to the Korean economy.As for the RMB,the post-G20 rally was short-lived probably because it appears that both sides have not fundamentally changed their positions.Investors appear wary of being too optimistic about the chances of a trade deal after the abrupt breakdown of negotiations in May.The RMB has also been subsequently weighed down by lower interest rates on the back of liquidity injections by the central bank,disappointing PMIs and Premier Li Keqiangs comment about lowering borrowing costs for private sector companies at the World Economic Forum on 2 July.In the coming weeks,it is possible that other Asian currencies may follow the KRW and RMB to also retreat,if the Fed disappoints the market primed for an imminent rate cut.The Fed next meets on 31 July.The USD strengthened after the strong payrolls release on 5 July,in a hint of what could come.As the higher yielding Asian currencies have appreciated more since the Feds meeting in mid-June,these are naturally more susceptible to some paring of long carry positions by investors.Among these,the IDR could be more exposed,especially if Bank Indonesia cuts rates when it meets on 18 July.On the other hand,the INR could be relatively more resilient,given the various supportive budget announcements on 5 July.For example,the fiscal deficit target was lowered to 3.3%of GDP and the government seems focused on attracting foreign capital,including through issuing foreign currency-denominated sovereign bonds.We have lowered our year-end USD-INR forecast to 70.0 from 73.0(see Asian FX Focus:INR:Striking a balance,12 July 2019).There are also downside risks for low-yielding currencies.The BoT recently