Asian interest rates: FOMC is approaching, it is highlights to reduce risk exposure and exit the Korean won to Taiwan dollar receiving transaction (Nomura)
Nomura Securities maintains its bearish view on higher medium-term interest rates in Asia as expectations of a Fed rate hike and geopolitical risk premiums remain.
Nomura Securities maintains its bearish view on higher medium-term interest rates in Asia as expectations of a Fed rate hike and geopolitical risk premiums remain. The report lowered South Korean won's confidence in Taiwan dollar receiving transactions to 2/5 and exited it, while holding Hong Kong long-term receiving and China 3-year payment positions. The logic behind it is that the Bank of Korea's expected interest rate hike has been factored into pricing, Taiwan's interest rates are unattractive, and Hong Kong's long-term interest rate spreads have potential downside. The market is currently highly uncertain about the Fed's follow-up actions. The potential trading implication is that investors are advised to look for opportunities to rebuild their positions after the risks of events such as FOMC have passed, and to pay attention to the catalytic effect of crude oil prices and inflation data on emerging Asian interest rates. One-sentence conclusion: Before the FOMC meeting, risks in the Asian interest rate market have increased. It is highlights that investors reduce risk exposure first and wait for clearer macro signals. Positive/negative: Negative for long Asian interest rates (i.e. short Asian bond prices). The current market may not be fully pricing in the Fed's hawkish expectations, especially on long-term rates in Asia. Catalysts: 1) FOMC meeting resolution and dot plot; 2) International crude oil price trends; 3) Inflation data of various Asian economies.