BOND MARKET ACROSS WITNESSED DIP

USA

The yield on the benchmark US 10-year Treasury note edged down slightly to 1.5% on Thursday after touching an over 2-week high of 1.53% the day before as investors continue to assess risks from the new omicron variant and await fresh CPI data due tomorrow which will likely to show inflationary pressures persist, strengthening the case for the Fed to double the pace of taper next week. Meanwhile, the Treasury sold $36 billion in 10-year notes Wednesday at a high auction yield of 1.518%. Foreign buyers took just under 69% of the sale, down 2% from the November auction.

EUROPE

The yield on UK 10-year government bond dropped below 0.8% in early December, hovering around its lowest level since mid-September, as expectations of an interest rate hike by the Bank of England faded after hawkish policymaker Michael Saunders said on Friday he wanted more information about the impact of the new Omicron coronavirus variant before deciding how to vote this month. Meanwhile, reports showed Prime Minister Boris Johnson could announce fresh restrictions to curb the spread of the new omicron coronavirus strain, including new work-from-home guidance and vaccine passports.

Germany’s 10-year government bond yield fell back below -0.33%, after setting the biggest daily rise in two weeks on Wednesday, as investors remained cautious on worries about the new coronavirus variant and ahead of the release of US inflation data on Friday and major central bank policy meetings next week. The European Central Bank is expected to leave monetary policy unchanged on Thursday.

The yield on the Italian 10-year BTP was at around 0.92%, still far from recent highs, as economic uncertainty boosted the demand for bonds and Fitch Ratings upgraded Italy’s sovereign credit rating. Last week, Fitch Ratings has raised Italy’s sovereign credit rating by a notch to BBB from BBB- with a stable outlook, its first upgrade in four years, citing a robust economic.

ASIA

The yield on the benchmark Japan 10-year JGB rebounded to 0.05% after hitting an over six-week low of 0.039% on December 6th, as concerns over the omicron variant eased. Health officials in South Africa, where the strain is thought to have originated, said patients were only showing mild symptoms, while US top infectious disease official Dr Fauci said that Omicron didn’t show any higher degrees of severity. Meanwhile, a Japanese government auction of 30-year bonds received demand worth 3.21 times the amount sold, lower than the bid-cover ratio of 3.45 times at the previous auction, sending yields on longer maturities higher. Limiting some of the upward momentum, Japan’s Finance Minister vowed to stick to the government’s fiscal balance goal by FY2025, after his party’s panel on fiscal policy had advised the government to abandon it and focus on supporting inflation.

The yield on the 10-year government bond in India edged lower to 6.3% after touching a 20-month high of 6.39% early in the month, after the RBI set a more dovish tone and left interest rates unchanged while ensuring that inflation remains within its target. Still, a surplus liquidity floating around INR 9.2 trillion and close to a record high is seen pressuring prices.

The yield on the benchmark China 10-year government bond dipped towards 2.82%, close to levels not seen since June of last year, following the People’s Bank of China (PBOC) announcement that it will cut the reserve ratio requirement by 0.5 percentage points on December 15th. The cut will allow banks to release up to 1.2 trillion yuan in the economy, the second time this year, as the nation faces increasing headwinds to economic growth. Earlier, the Chinese 10-year bond yield was already being pressured by the central bank’s massive liquidity injections worth CNY 100 billion of reverse repos, aiming to keep liquidity loose in an effort to help boost the recovery despite inflationary pressures. The nation has been battling several delta variant outbreaks while sticking to the “Zero Covid Policy”.