Asian bond yields elevated, equities tick higher ahead of Powell speech

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Most Asian equities rose while bond

yields remained elevated, as investors awaited U.S. Federal

Reserve Chairman Jerome Powell’s Congressional testimony later

for clues into the central bank’s thinking on inflation

expectations and rising yields.

Yields on benchmark 10-year bonds in the region stood at

multi-month highs as investors recently sold Asian bonds after a

jump in U.S. Treasury yields.

A recent rally in Asian equities has been capped by rising

bond yields. Higher bond yields are generally seen as a negative

for equities as they diminish the attraction from stocks’

dividend payouts, while debt servicing for companies becomes

more expensive due to higher borrowing costs.

“This explains why equities across the Asia-Pacific have

entered a consolidative phase in the last couple of days. Stocks

have rallied a fair bit since March, making them vulnerable to

rising yields, particularly in the tech sector,” said Margaret

Yang, strategist at DailyFX.

“Powell’s testimony will be closely eyed to see how tolerant

the Fed is in view of rising yields, and how they will address a

strengthening inflation outlook.”

Most Asian emerging currencies inched higher as the dollar

hit a six-week low.

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The Indian rupee rose to 72.333 per dollar. It has

risen continuously for the last three months, and is up nearly

1% so far in February.

Analysts at HSBC recently raised their growth forecasts for

India to 11.2% from 9% for the coming fiscal year, noting that

the country was experiencing a remarkably strong recovery amid a

sustained decline in COVID-19 cases.

“By some measures, industrial activity is only a few

percentage points below its pre-pandemic peak. Mobility, too,

has largely recovered, which should help spur services demand,

which is still 25% below pre-pandemic level, in the coming

months.”

Philippine equities closed flat after falling 1%

earlier after the government extended coronavirus restrictions

in the capital Manila late on Monday.

Manila – which accounts for 40% of the Philippines’ economic

output and has been under partial curbs since August – will see

partial curbs retained until vaccinations start, limiting the

operating capacity of businesses and public transport.

“We don’t know how long it will take before the vaccine can

be effectively rolled out and lockdown measures can be lifted.

Even once the vaccination is kicked off, it will take sometime,

and the efficacy of the vaccine to the public is unknown,” said

DailyFX’s Yang.

The inoculation drive in the Philipines is expected to start

with 600,000 doses of the Sinovac Biotech vaccines donated by

China, which is expected to arrive later this month.

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Stock markets were shut in Japan due to a public holiday.

HIGHLIGHTS

** Indonesian 10-year benchmark yields are up 2.4 basis

points at 6.685%​​

** Malaysia’s 10-year benchmark yield is up 0.9 basis points

at 2.984%​​

** Top gainers on the Thailand’s SETI include Group

Lease PCL up 26.53% and TRC Construction PCL up

12.5%

Asia stock indexes and

currencies at 0522 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCK

DAILY YTD % X DAILY S YTD

% % %

China EC>

India +0.16 +0.94 <.ns ei>

Indones +0.07 -0.43 <.jk ia se>

Malaysi +0.00 -0.50 <.kl a se>

Philipp +0.04 -1.30 <.ps ines i>

S.Korea 11>

Singapo +0.10 +0.07 <.st re i>

Taiwan +1.58 +2.11 <.tw ii>

Thailan +0.10 -0.13 <.se d ti>

(Reporting by Rashmi Ashok in Bengaluru)

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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