Market Daily

Fixed Income Market Updates

EUROPEAN BANK COCO (AT1)

European bank coco continued to go lower. General market tone was heavy and bond prices were 0.25-0.50 points lower. The Bloomberg European Bank Coco Tier 1 Index was also wider by 13  basis points last week. We reiterate our view that coco bond valuation is expensive. We expect to see more correction.

ASIA INVESTMENT GRADE (IG)

It was a quiet session for Asia IG as both Philippines and Indonesia were on holiday. Credit spread was 1-2 basis points wider. We saw more selling from institutional investors to hold more cash ahead of Trump’s US Liberation Day. HK IG was weaker after US sanction news. Spread was 2-3 basis points wider. Hysan Perpetual bond was another 0.375 points lower. We expect the weak momentum for HK IG to stay due to the headline risks.

ASIA HIGH YIELD (HY)

China HY was weaker. China Vanke was 0.25-1 points lower after the weak result. Future Land was down 1-1.5 points after the news about its sister company’s stock suspension. Outside of China, India and Indonesia HY were also weak and we generally saw more selling from institutional investors. Overall, market sentiment remains weak for the space and we remain cautious on Asia HY bonds. We expect to see more weakness. 

Forex Market Updates

USD

The US Dollar was little changed against a basket of other major currencies on Tuesday after the White House confirmed that US President Trump will go ahead and impose new tariffs on Wednesday, though it provided little detail about the size and scope of the trade barriers that have markets fretting about an intensifying global trade war. Economists at the Atlanta Fed said a recent survey showed that corporate finance chiefs expect Trump’s tariffs to push prices higher this year while cutting into hiring and growth. On the central bank front, Fed policymaker Goolsbee said that while the “hard data” shows the underlying US economy is solid, with a strong labour market and inflation down from its 2022 peak,  the imposition of a broad new set of tariffs could lead to renewed inflation or an economic slowdown. Separately, Fed official Barkin said that he is concerned that the tariffs will push up prices and hurt the job market.

The Dollar Index should see some consolidation above 103.35 for the time being.

GBP

The British Pound traded mostly sideways yesterday within a 0.5% intraday range after UK PM Starmer said that talks with the US on a trade agreement that would help Britain avoid being hit by Trump’s import tariffs were “well advanced”. Analysts are largely in consensus that the UK will escape the worse excesses of Trump’s tariffs, largely due to the UK’s relatively benign trade position vis-à-vis the US, which should keep the GBP better supported relative to other currencies. On the data front, UK Manufacturing PMI figures slid to their lowest since 2023 as British manufacturers endured a torrid March under the spectre of US tariff threats and looming tax increases at home. Elsewhere, BoE policymaker Greene revealed her concern about increases in the public’s expectations for future inflation, but added that they remained anchored.

Sterling should see some near term consolidation between 1.2800 and 1.3000.

AUD

The Australian Dollar halted a run of three consecutive days of losses after the RBA left interest rates unchanged as widely expected in a policy meeting overshadowed by rising concerns of a global trade war. The central bank’s statement assumed a slightly dovish tilt, dropping an explicit reference to being cautious about cutting rates again and omitting a sentence that upside risks to inflation remain, while RBA Governor Bullock added that “at the moment it seems prudent to wait and get a bit more data”. While analysts say that the Aussie economy has moved past its worst, the outlook has been clouded by the spectre of a global trade war ahead of US President Trump’s “Liberation Day”, especially as Australia is a major exporter of resources to China and tariffs on the world’s second-largest economy could hinder growth there and weigh on its demand for commodities.

Ongoing trade war concerns are likely to keep a lid on potential Aussie strength moving forward, with stiff resistance expected around 0.6400.

XAU

Gold prices broke to a fresh record high for the third straight day with psychological levels swept aside by strong safe haven demand on worries about the fallout from impending US tariffs. Also supporting the precious metal’s extraordinary rally are strong demand from central banks, expectations of Fed rate cuts this year and geopolitical instability in the Middle East and Europe. The good news for gold bulls is that given the current macroeconomic environment, analysts say that a continuation of this trend “appears sustainable in the near term”. Data released by the World Gold Council last week also reflected the surging investor appetite for bullion, with February seeing the largest inflows into gold-backed ETFs since March 2022.

Given the array of supportive factors, gold bulls are likely to target the 3,200 level going forward.