On 15 March, the United States Federal Reserve’s Open Market Committee raised the federal funds rate 25 basis points (bps) to a range of between 0.75% and 1.00%. The Federal Reserve noted that the labor market continued to strengthen and economic activity maintained its moderate pace of expansion. The Federal Reserve also said that current monetary policy remains accommodative and supportive of further improvements in the labor market and of inflation reaching its 2.0% target.
Last week, the People’s Bank of China raised interest rates on its 6-month and 1-year medium-term lending facilities by 10 bps each to 3.05% and 3.20%, respectively. The central bank also raised the rates on reverse repurchase transactions by 10 bps. The Hong Kong Monetary Authority raised its base rate 25 bps to 1.25%, following the rise in the Federal Reserve’s policy rate. In its meeting held on 15–16 March, Bank Indonesia’s Board of Governors decided to keep the 7-day reverse repurchase rate steady at 4.75%. At its monetary policy meeting on 15–16 March, the Bank of Japan announced that it would continue its “qualitative and quantitative monetary easing with yield curve control” program.
Indonesia recorded a trade surplus of USD1.3 billion in February, slightly lower than the USD1.4 billion surplus in January, buoyed by a surplus in the non-oil and gas trade. For the fourth consecutive month, Singapore’s non-oil domestic exports expanded, growing 21.5% year-on-year (y-o-y) in February following 8.6% y-o-y growth in January.
Industrial production in the People’s Republic of China (PRC), as measured by the value-added of industrial output, rose 6.3% y-o-y in January–February after a 6.0% y-o-y rise in December. In Hong Kong, China, provisional data showed that industrial production, measured by the industrial production index for manufacturing industries, fell 0.8% y-o-y in the fourth quarter of 2016 after declining 0.1% y-o-y in the third quarter. Malaysia’s industrial production expanded 3.5% y-o-y in January following growth of 4.7% y-o-y in the preceding month.
Overseas Filipinos personal remittances rose 8.5% y-o-y to USD2.4 billion in January. Meanwhile, overseas Filipinos cash remittances coursed through banks reached USD2.2 billion in January on 8.6% y-o-y growth.
The PRC announced that it would allow investors in Hong Kong, China to buy bonds in the PRC. The Hong Kong Exchange and the China Foreign Exchange Trade System will create a bond trading platform to allow investors in Hong Kong, China to trade bonds in the PRC.
WATCH OUT: The upcoming issue of the Asia Bond Monitor will be released on 22 March and will be available for download on the AsianBondsOnline website.
Local currency government bond yields fell for all tenors in the Republic of Korea; and for most tenors in all the other markets in the region except in the PRC where yield movements were mixed. Yield spreads between the 2- year and 10-year tenors narrowed in all markets in the region except in Hong Kong, China.