TAIWAN: HSBC Sees CBC On Hold For Extended Period

At The Tokyo lunch break, JGB futures are stronger, +15 compared to settlement levels.

• BoJ board member Takata reiterated that the central bank is in a position to adjust policy rates further if the outlook is met. Takata stated that risks of big market moves have been lowered, giving the central bank more flexibility. This is a likely nod to last year's sharp risk off move in the wake of the end July hike by the central bank (although other factors were also in play).
• Japan's January trade figures were mixed. Exports rose 7.2% y/y, close to the 7.7% forecast and up from the prior 2.8% pace. Imports surged though to 16.7%y/y, from 1.7% in Dec and against a 9.3% forecast.
• Other Japan data released showed core machine orders for Dec weaker than forecast. We fell 1.2% m/m, against a 0.5% forecast and 3.4% prior. In y/y terms we printed 4.3% (against a 7.5% forecast and 10.3% prior).
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s heavy session.
• Cash JGBs have slightly bull-steepened, with yields flat to 1bp lower across benchmarks. The benchmark 10-year yield is 0.2bp lower at 1.428% after hitting a fresh cycle high of 1.446%.
• Swap rates are 1-5bps higher, with the 20-year underperforming. Swap spreads are wider.

• Since the lows in early January, bond yields in China have inched higher quietly. From a low of 1.01%, China’s 2YR Government bond yield has moved 39bps higher to 1.40% for yesterday’s close. For the 5-year, yesterday’s close of 1.53% represented a move of +21bps higher. The 10-year benchmark has risen from a low of 1.59% to yesterday’s close of 1.71%.
• When considering the moves in bond yields compared to the move to the CSI 300, it poses something interesting.
• Finishing 2024 at 3,934.91, the index closed yesterday at 3,912.78 – a decline of -0.56%.  However, it is the move in recent trading sessions that calls for further investigation.
• Against a backdrop of a 2.7% gain in the CSI 300 during the trading sessions on Thursday and Friday last week, and Monday; the 10YR bond yield rose 7bps, and the 2YR is 13bps higher.
• This comes after a period where bond markets had been relatively calm, despite news that the PBOC had halted their bond purchases in mid-January.
• The move higher yields is also against a backdrop of comments from the PBOC Governor in Saudi Arabia on Sunday that more accommodative monetary policy can be expected.
• A further development in recent days has been the meeting between President Xi and Alibaba’s Jack Ma and other key entrepreneurs; in a sign that the relations between the President and the private sector could be improving.
• Whilst a short period move does not make a trend, the CSI 300’s rally and the inverse move from bonds is worth noting. 

Figure1:  CGB10YR  and CGB 2YR yields (source: BBG)

• New home prices in January fell by -0.07%, a modest improvement from the -0.08% in December.
• This represented the fifth consecutive month of improvement.
• Used home prices fell -0.34%, a modest increase from -0.31% in December.
• For used home prices, this halted a run of improving prices for four months.
• Prices for new homes fell in 42 cities, compared to 43 the month prior.
• Beijing new home prices -0.4% m/m; -5.7% y/y
• Shanghai new home prices +0.6% m/m; +5.6% y/y.
• Beijing used home prices +0.1% m/m; -3.8% y/y
• Shanghai used home prices +0.4% y/y; -2.3% y/y
• The January prices will provide little insight into the progress in the sector, as the month was impacted by the Lunar New Year holiday.