- Banking
- Wealth
- Privileges
- NRI Banking
- Treasures Private Client
Related Insights
10Y yields have declined across the globe since the start of the year. There is no single factor behind this rally, but investors appear comfortable taking duration risks now that the acute part of the Fed tightening cycle is over. Stretched and prolonged underweight / or short positions through much of 2022 might have exacerbated the move lower. Within the DM space, 10Y yields are generally down by around 30-50bps, which marks a decline in term premium as central banks have not cut rates. The exception within the G10 is Japan, where 10Y JGB yields are up by 10bps. This makes sense as the BOJ is the latest in the tightening cycle and the tightening takes place through the 10Y rates, not short-term rates like other G10 economies. Speculation of a more aggressive BOJ will likely keep the JGB curve steep. We also see material risks of BOJ shifts (targeting 5y tenor for example) in the coming months that could lead to a more volatile adjustment higher in 10Y JGB yields. To be fair, the BOJ might well couple any drastic relaxation in YCC with temporary bond buying in order to smooth the adjustment process. Even if the BOJ refrains from adjusting today, we doubt speculation on further tightening would dissipate.
Within emerging Asia, China stands out with yields up some by around 7bps. China is slower in terms of the economic cycle. Having only recently reopened and the authorities providing more support to the property sector, the cyclical bounce over the coming quarters can be considerable. While we think liquidity will likely be kept ample for some time, better prospects later this year would inevitably exert upward pressure on term CNY rates.
In Asia, SGD and HKD rates have fallen materially, and this is in large part tracking the performance in US Treasuries. KTB rates were elevated for the most part of last year as the BoK struggles to keep up with the Fed. With Korea’s economy facing downturn risks and stresses appearing in the credit space, room for rate hikes have become much more limited. Taking KRW duration risks appears to be much more interesting this year.
We believe duration fear has been overcome. This makes sense as yields are now much higher and on a total return point of view, coupons will be sufficient to offset losses if a moderate rise in yields occur. China’s reopening improves the cyclical outlook for the global economy, but we are not convinced that the level of pessimism reflected in the DM curves, especially the US, is warranted.
Topic
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). This report is intended for “Accredited Investors” and “Institutional Investors” (defined under the Financial Advisers Act and Securities and Futures Act of Singapore, and their subsidiary legislation), as well as “Professional Investors” (defined under the Securities and Futures Ordinance of Hong Kong) only. It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 13th Floor One Island East, 18 Westlands Road, Quarry Bay, Hong Kong SAR
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.