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US Treasury yields were stable across the curve on Wednesday. Fed Governor Christopher Waller remarked that there was no need to rush to lower interest rates, adding that he wants to see “at least a couple months of better inflation data” before cutting. He said, “in my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data”. Credit markets saw the US IG CDS spread tighten 1.7bp and the HY spread tighten 6bp. Looking at equity indices, S&P and Nasdaq ended higher by 0.9% and 0.5% respectively.
European equity indices closed slightly higher. European IG CDS spreads tightened 0.3bp and crossover spreads were 2.5bp tighter. Asian equity markets have opened higher today. Asia ex-Japan IG CDS spreads were 0.3bp wider.
Indonesia’s BNI raised $500mn via a 5Y bond at a yield of 5.28%, 38bp inside initial guidance of T+145bp area. The notes are rated BBB. Proceeds will used for general corporate purposes.
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Sovereign risk premium refers to the additional implied spread that a country’s sovereign bonds offer vs. a benchmark for a particular currency. Put differently, it is the incremental return (or yield) that investors demand from a country to buy its sovereign bonds vs. the benchmark.
On EM Assets Sliding as Traders Shift Focus to Waller Remarks
Juan Perez, director of trading at Monex
“Fourth-quarter GDP could surprise with an upward revision, thus making it less likely that the Fed intervenes in what seems like a very strong economy”
On Indian Bonds Seeing Biggest Selloff in a Year by Global Investors
Philip McNicholas, Asia sovereign strategist at Robeco
“Offshore investors may have wanted to limit potential losses on what is still an off benchmark position. Much the same way you see equity selloffs on such days”
Macquarie Capital strategists
“With INR having outperformed recently and crowded positioning, it is possible that the RBI may allow some further upside to USDINR to 84-85 range, before engaging in heavily”
On BOJ policymakers seeing the need to go slow in future rate hikes – March summary
BOJ member
“Even if the BOJ ends negative rate policy, it would need to emphasize its cautious stance as the economy is not in a state where rapid interest rate hikes are necessary”