Asian bonds are seen as resilient to Fed By Reuters

By Divya Chowdhury and Aaron Saldanha

MUMBAI (Reuters) – Asian bond markets are likely to remain resilient despite the US Federal Reserve releasing stimulus this year and rising interest rates, economists said.

Measured inflation will keep financial conditions relatively easier in Asia, where it is even more in line with bond supply demand, said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income.

Asian bond markets will be more resilient to risk appetite, and there is less risk of rising rates, “despite the situation in China,” Tipp told Reuters Global Markets Forum (GMF).

Analysts at Morgan Stanley (NYSE 🙂 He wrote that a change in China’s political stance will lead to a resurgence from “excessive tightening” to agility.

Staying “more constructive than consensus” around Asia

Forecasts of growth, Morgan Stanley also mentioned exports and investment boosting a strong and productive cycle in the region.

“Real U.S. rates have not risen to a large extent and the starting point for Asia’s macro-stability means that Asia will.

Be able to handle the Fed’s tightening cycle, ”they wrote.

Japan is expected to maintain its ultra-loose policy, easing China even further is likely to result in lower yields, and South Korea’s yields, while already falling sharply, will squeeze the Bank of Korea beyond Friday’s rise.

“Asia isn’t going to go crazy with local rates, so U.S. rates may not have too much of an impact,” said Robert Carnell, ING’s chief Asian economist and head of research.

“On the contrary, we can see that Australian bonds are following the US closely (possibly), and we can see suggestions from the Australian Reserve Bank at the end of its taper and the temporary elimination,” Carnell said.

The U.S. yield curve eased last week after Fed minutes, as investors are ready to raise rate hikes as soon as March.

Two-year U.S. Treasury yields rose to a record high of 0.945% in nearly two years, but fell to 0.9089% for Fed Chairman Jerome Powell on Tuesday after a congressional hearing.

Brian Coulton, chief economist at Fitch Ratings, wrote in a statement that a full normalization would raise US nominal interest rates to around 3% in the medium to long term, and likely to raise global rates.

(Enter GMF, a chat room hosted on Refinitiv Messenger: https://refini.tv/33uoFoQ)