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Speaker 1: This is Bloomberg Daybreak Asia, Brian Curtis and Juliet Sally

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Speaker 1: and Francis Young is our guest rage strategist at OCBC Bank.

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Speaker 1: So it seems like one of the driving forces, Francis

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Speaker 1: is rising treasury yields. So it seems like every day

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Speaker 1: we're hitting new levels, and it really takes us back

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Speaker 1: to the global financial crisis. The yield on the two

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Speaker 1: year here just under four point six zero percent. This

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Speaker 1: is obviously supporting the dollar and that is suppressing a

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Speaker 1: lot of currencies in the Asia Pacific in terms of

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Speaker 1: strong dollar. What's the biggest impact we're seeing in Asia

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Speaker 1: at the moment, Hi, Brian and Juliette you as the

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Speaker 1: fat has been hiking aggressively and likely to continue to

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Speaker 1: do so. We have the subsequent compression in defense shows

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Speaker 1: between treasuries and a lot of the local currency boards

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Speaker 1: here in Asia, and that would apparently have an impact

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Speaker 1: of um foreign exchange, the compression of you itself. On

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Speaker 1: a more positive note, we flect the resilience of a

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Speaker 1: lot of these local currency bonds for domestic reasons. However,

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Speaker 1: I think there is a limit as to how much

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Speaker 1: further these local currency bonds can outperform, so that also

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Speaker 1: of course would have an implication on effects funds. For example,

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Speaker 1: we have seen a lot of outflows from various of

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Speaker 1: these current these local currency bonds, including those from Indonesia

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Speaker 1: for someone's from Malaysia, also very sub built in flows

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Speaker 1: into c gbs in China, etcetera, so that would also

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Speaker 1: have an implication on central bank. How much regional central

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Speaker 1: banks can resist to high rates partly depend on their

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Speaker 1: balance of payment. But taking a step back, there is

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Speaker 1: also actually an assultdox argument. More more and more normal

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Speaker 1: conventional argument to be made on the inflation front. A

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Speaker 1: weak currency because of the strong dollar will add to

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Speaker 1: important inflation, and this argument is particularly strong this time

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Speaker 1: around because of this applied side drifferent inflation, so that

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Speaker 1: may also require a monetary response. So in the region,

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Speaker 1: and the Bank of Korea is the first mover, while

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Speaker 1: we are also monitoring the Bank of Thailand and Bank

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Speaker 1: Togovern Malayshire because both are on the Duffish side, so

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Speaker 1: there may be some catch up to play. What about

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Speaker 1: when it comes to China, which is on the other

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Speaker 1: side as we know, and we're expecting further monetary easing

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Speaker 1: there we may get some kind of relaxation. We're talking

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Speaker 1: about the reduced quarantine. But how does the divergence in

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Speaker 1: monetary policy kind of really play out in Asia and

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Speaker 1: China has I think, together with Japan is kind of

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Speaker 1: the exception in this global central bank hopeishness. China has

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Speaker 1: always been running its policies. Pay more attention to domestic development.

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Speaker 1: Sticking to the zero COVID policy mayor don mean even

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Speaker 1: more need for support to the economy. One way is

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Speaker 1: to promote credit, which in terms will promote economic activity.

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Speaker 1: As such, a monetary policy in China is on the

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Speaker 1: on an easy bias. However, there are many tools and

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Speaker 1: combinations that the is the UH. These two of these

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Speaker 1: tools that China can deploy. So thus far measures appear

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Speaker 1: to focus more on quantity rather than outright interest rate cut.

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Speaker 1: So despite the easing bias Roman biing interest rates are

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Speaker 1: trading in ranges and are not really falling that much

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Speaker 1: in this environment. That is good enough because you have

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Speaker 1: a stable domestic interest rate, but UH rising dollar rates,

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Speaker 1: so you completions is still there in UH in the

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Speaker 1: Chinese market. UM, but the implication is a bit too

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Speaker 1: folded because now US US always have come to such

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Speaker 1: a high level that although in China there is a

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Speaker 1: stable interest rate environment which should be favorable for bond

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Speaker 1: because bond prices are not expected to drop much, the

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Speaker 1: U defense source is a major factor. It's not appealing

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Speaker 1: in the first place. It's not appealing enough maybe to

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Speaker 1: outrage the advantage from a more stable interest rate environment.

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Speaker 1: So over a strong comeback of one in bond inflows

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Speaker 1: into the Chinese market is still not insight. Yeah, let's

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Speaker 1: talk about Japan a little bit. Um, it's it's a

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Speaker 1: very interesting story and that we saw three percent inflation

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Speaker 1: print today. Of course, um, that's not quite the same

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Speaker 1: when you look at stripping out energy and food. But

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Speaker 1: in any case, headline number at three percent, I guess

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Speaker 1: in some ways that's a little bit of success there

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Speaker 1: and in bringing back inflation, although maybe more to do

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Speaker 1: with global conditions than policies at home. But the yield

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Speaker 1: curve control, if if if they were to think of

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Speaker 1: this as a partial victory, is there any chance that

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Speaker 1: they would relax the yield curve control policy? And would

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Speaker 1: that allow yields to go up and would support the currency.

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Speaker 1: But what would the other impact be on other nations.

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Speaker 1: I think that the U com persons is the most

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Speaker 1: obvious in the g GP and estuary part, and I

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Speaker 1: would say, of course you cannot have the best of both.

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Speaker 1: Who also if you stick with the you curve control

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Speaker 1: then of course that would have the implication on the

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Speaker 1: gain as well. And TUSK far, we haven't really since

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Speaker 1: that there is an urgency for them to remove that

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Speaker 1: and even they have come to appoint the decision to

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Speaker 1: try to considering trying to consider doing something to the

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Speaker 1: vices d uh. I would expect the access strategy to

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Speaker 1: be a very tough one because now TCH reuse and

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Speaker 1: global use have run so far ahead of the j

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Speaker 1: g B DU already. Uh they just remove it one

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Speaker 1: off or they adjust the outward the use, et cetera.

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Speaker 1: If they adjust outward the target, the market will just expect,

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Speaker 1: like instantly test the upper band of the new band.

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Speaker 1: So that's really a very tough decision. But it seems

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Speaker 1: in the Veneer term the Bill j Rectoric seems to

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Speaker 1: be really sticking to that. Singapore saying they're monitoring what's

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Speaker 1: happening in the UK very closely. There's many people, probably

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Speaker 1: yourself included, that have their pension funds and in pounds

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Speaker 1: here in Singapore as well. What are we saying though

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Speaker 1: in terms of the strength of the Singapore dollar and

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Speaker 1: what's the outlook as the m AS continues to tighten

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Speaker 1: the MS. The last the latest meeting that we centered upward, however,

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Speaker 1: they kept the slope of the singular near unchanged, So

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Speaker 1: that has an implication for singlear race. But we have

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Speaker 1: to take note of the different dynamics in the sing

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Speaker 1: dollar policy versus or other interest rate policies. UH. Normally,

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Speaker 1: when the Fed or others into brand the high rates

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Speaker 1: right the impast rightforward, you have higher interest rates. However,

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Speaker 1: in the singular market like the latest one with the

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Speaker 1: unchanged look, we think that is the less hokish UH

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Speaker 1: than expected, and less hokies would actually mean higher sing

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Speaker 1: dollar rates. It might sound strange through the ethics for

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Speaker 1: swork dynamic, but let's put it more intuitively. So if

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Speaker 1: the MS is more hokish than you expecting dollar to

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Speaker 1: appreciate against a basket that would have some spill over

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Speaker 1: on dollar things as well, then you will be more

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Speaker 1: willing to hold sing dollar in a slightly lower interest

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Speaker 1: rate than otherwise. So now with them seems to be

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Speaker 1: getting a bit less Hockeyes were expecting dollar rates to

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Speaker 1: rise more closely with dollar rates. Francis, thank you so

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Speaker 1: much for joining US. Francis to young rate strategist at

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Speaker 1: OCBC Bank