INSUBCONTINENT EXCLUSIVE:
RBI has cut interest rates by 110 basis points so far this year.BENGALURU: Sovereign bond yields across most major emerging Asian economies
will slip in the months ahead as all central banks across the region are expected to cut interest rates further to nurse their economies
back to health, a Reuters poll showed.A sharp slowdown in these export-reliant economies as the US-China trade war worsened has pushed
policymakers to either trim rates significantly or signal more easing soon.That has led to increased demand for low-risk government debt in
the region, pushing yield curves to invert in Singapore, Thailand and Hong Kong - meaning short-term yields are higher than long-term rates
- which many experts in developed markets consider an indicator of an impending recession."Countries which are heavily dependent on exports
are all suffering from the trade warI see growth concerns getting more prominent in driving policy easing," said Prakash Sakpal, Asia
economist at ING."The tariff war provides no hopes of a near-term trade deal, supporting the positive sentiment towards Asian bonds."China's
10-year note yield has declined more than 10 basis points, while in Singapore, South Korea, India, Indonesia, Thailand and Malaysia yields
have fallen 30-90 basis points this year so far.The Philippines 10-year government bond yield has slumped as much as 230 basis points.The
overall lower trend is unlikely to change over the coming year, with yields for benchmark bonds of those countries, barring Thailand,
predicted to fall further, according to the September 19-27 poll of more than 40 fixed-income strategists and economists.The already modest
outlook for China, India and Indonesia was downgraded from a poll taken three months ago.Growth in China, the region's economic powerhouse,
is expected to slow to 6.2 per cent this year and 6.0 per cent next, after averaging double-digit growth since 1978, when Mao Zedong's
rule ended, according to economists in a separate Reuters poll.That is despite the People's Bank of China (PBoC) cutting its reserve ratio
requirement three times this year and its one-year loan prime rate on Septenber 20.Expectations for further easing led strategists to cut
predictions for China's 10-year bond yields, which is now forecast to fall to 3.0 per cent by the end of this year, its lowest since
December 2016.It is forecast at 2.94 per cent in a year."The downside risks to growth will be constructive for China government bonds
As we expect a policy rate cut in the next quarter, the hurdles for a further decline in CGB yields will have been removed," wrote Richard
Yetsenga, chief economist at ANZ."We expect the downtrend bias in the 10-year CGB yield to continue into 2020."Other Asian economies are
also highly exposed to a trade slowdown, as since the Asian crisis more than two decades ago policymakers have pursued export-oriented
Any resilience to external shocks hinges on robust domestic demand.The latest consensus showed government bond yields in India, South Korea,
Indonesia, Malaysia, Philippines and Singapore will fall between 10 and 40 basis points over the coming year.If those predictions are
realized, it will increase worries among policymakers where yield curves have already inverted.Nearly two-thirds of respondents to an
additional question agreed and said the recent yield curve inversion in those economies suggested a significant growth slowdown or a
recession."Recession is knocking at the doors of Singapore, Thailand and Hong Kong and the recent inversion is probably signalling the right
thing," said ING's Sakpal.Most major Asian central banks are predicted to ease further to boost growth, including the Reserve Bank of India
(RBI) which has been one of the most aggressive, cutting interest rates by 110 basis points.However, the low transmission pace of those RBI
rate cuts has not helped Asia's third-largest economy - while its regional peers face similar hurdles."The impact of monetary policy is
diminishing more broadly than just across the core of Asia," added ANZ's Yetsenga."The limited effectiveness of policy in Japan and the EU
But, even in the US with still 200 basis points between the fed funds rate and zero, policy is not packing the same punch."Get Breaking
news, live coverage, and Latest News from India and around the world on TheIndianSubcontinent.com
Catch all the Live TV action on TheIndianSubcontinent 24x7 and TheIndianSubcontinent India
Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.
