HSBC ‘Mildly Bullish’ on AUD Bonds, Favors Long Duration in EM
(Bloomberg) -- Yields on Australia’s 10-year notes near a recent high of about 2.9% are a “buy signal,” according to HSBC.
- Recent RBA communication has been remarkably upbeat, and 3-year yields could well re-test top of the 1.92-2.22% 3Q range
- Tendency for the curve to flatten sharply as RBA hikes should be repeated given rapid rise in household leverage
- Curve looks steep relative to its peers and supply is supportive
- Also “mildly bullish” on N.Z. govt bonds
- RBNZ is firmly in a holding pattern while real yields are still the highest in G-10 and curves are steeper than most peers, providing plenty of buffer and attractive carry
- Maintains long duration stance in EM rates
- Too early to de- risk as positioning is still light and duration extension in EM local rates is yet to kick off
- High real rates, a benign inflation outlook and scope for further easing in several markets support HSBC’s bullish stance
- Retains preference for local bonds in Indonesia (20-year), Malaysia (20-year), South Africa (13-year), India (13-year), Brazil (10-year), Mexico (10- year) and Russia (five-year)
To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kartik Goyal in Mumbai at kgoyal@bloomberg.net
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