THAILAND: VIEW: Goldman Sachs Believes BoT On Hold Now, Risks To Downside
Feb-27 04:17
The Bank of Thailand cut rates 25bp to 2.0% at its February meeting, while consensus looked for no change. Goldman Sachs had expected this move, but it now expects BoT to leave rates at 2.0% through 2025 “as the central bank is likely to want to preserve some policy space” but the risks are skewed to the downside.
- Goldman Sachs sees the risks to its forecast of unchanged Thai policy rates towards “a more dovish central bank (more cuts) especially if there is further deterioration in the domestic economy.”
- “In the forward guidance, the central bank stated that today's decision is "consistent" with the current economic assessment and "remains robust to risks going forward". In the press conference, the BoT noted that they do not have much monetary policy space and the bar to cut at the next meeting is "high". BoT further note that this is not the start of easing cycle and the policy rate is still within a neutral range.”
- “The press release noted that today's decision would help ease financial constraints with growth in 2025 likely to be slower than BoT previously forecasted. The growth slowdown is mainly due to drag from the manufacturing sector given the structural issues in the economy (e.g. competitiveness).”
- “In the Q&A session, the BoT spokesperson said growth for 2025 is likely to be around 2.5% or slightly above (vs. 2.9% previously; GSe: 2.4%).”
- Headline inflation is likely to come closer to the lower end of the BoT target band of 1-3% at 1.1% in 2025 (GSe: 1.2%). Downside risk to inflation from potentially lower global crude oil price.”
- “The BoT reiterated that it will closely monitor the development in financial market and movement of THB amid the increase in volatility.”
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BONDS: NZGBS: Richer But Well Off Bests, Fin Min In Parliament Tomorrow
Jan-28 03:46
NZGBs closed 3-6bps richer, with a flatter 2/10 curve, but well off session bests. The local market was 7-8bps richer early after yesterday’s strong lead-in for US tsys. Cash US tsys are ~2bps cheaper in today’s Asia-Pac session.
- NZGBs slightly outperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials narrowing by 1-2bps. The NZ-US 10-year yield differential, now at -7bps, is edging closer to the cyclical low of -15bps recorded in December 2022—the lowest since late 2020.
- Swap rates closed 2-3bps lower.
- RBNZ dated OIS pricing closed 1-4bps softer across meetings, with late 2025 leading. 48bps of easing is priced for February, with a cumulative 113bps by November 2025.
- Tomorrow, Finance Min Willis speaks to the Select Committee on the Budget Policy Statement and Half-Year Economic and Fiscal Update. RBNZ Chief Economist Paul Conway will also present a speech titled: Beyond the Cycle: Growth and interest rates in the long run.
- On Thursday, the NZ Treasury plans to sell NZ$200mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-36 bond and NZ$100mn of the 1.75% May-41 bond.
EQUITIES: HK Equities Slightly Higher, Chinese Semiconductor Stocks Struggle
Jan-28 03:35
BOJ: Japan Government Nominates Junko Koeda To BoJ Board
Jan-28 03:30
Per BBG headlines, the Japan Government has nominated Junko Koeda to the BoJ board. She will replace Seiji Adachi.
- Per the new board member's website from Waseda Univsersity: "Ms. Junko Koeda previously held positions as a chief economist at the Ministry of Finance of Japan, an assistant professor at the University of Tokyo, and a staff economist at the International Monetary Fund. She has a Ph.D. degree in economics from UCLA and a bachelor’s degree from the University of Tokyo." (See this link for more details).
