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1、4 July 2019THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLES (EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF(THE PRC)AND MACAO)EM local rates are being pulled by opposing forces policy easing vs slowdown concerns reinforced by US curve inversionWe see opportunities for duration extension in certain EM

2、 high yieldersPosition for wider bond-swap spreads and strategic receivers in EM low yieldersuAndre de Silva, CFAHead of Global EM Rates ResearchTheand Shanghai Banking Corporation Limitedandre.de.silva.hkuPin Ru TanAsia Pacific Rates Strategistationupin.ru.tan.sgRadoslaw BodysHead of CEEMEA Rates S

3、trategy HSBC Bank plc radoslaw.bodys+44 20 7991 5882Mario RoblesHead of LatAm Rates Strategy HSBC Securities (USA) Inc. mario.roblesus Yield inversion: There is a debate about the validity of US curve inversion as a signalling tool for a US recession. However, the underlying signal of a late economi

4、c cycle is a potent one and curve inversion is spreading across EM too. Our analysis indicates that over the past 15 years, 17 out of 29 episodes of curve inversion in major EM swap markets were a precursor to a recession. We also find that US curveinversion has a significant bearing on EM.Dayeon Ho

5、ngAsia Pacific Rates StrategistPolicy pills: There is also uncertainty about whether the Feds dovish guidance and policy easing accelerating elsewhere will dampen the late cycle characteristics and associated deteriorating credit quality in EM. Our research, going back to 1970, finds that sovereign

6、external debt spreads have not peaked until a recession is wellunderway, an average of 22 months after the initial inversion.Theand Shanghai Banking Corporation Limiteddayeonhong.hkHimanshu Malik, CFAAsia Pacific Rates StrategistTheand Shanghai Banking Corporation LimitedHigh-yielders: We believe th

7、e risk premium in EM local bond curves is not too low and there may be a case for incrementally turning more constructive on duration in certain EM high yielders, especially in markets where expectations of policy easing could intensify. We identify Russia (Long 5yr OFZs), Brazil (Long BNTNF-27s) an

8、dSouth Africa (Long R2035 SAGBs) as being in this group.himanshu1malik.hkMonty GandhiLatAm Fixed Income Strategist HSBC Securities (USA) Inc. monty.s.gandhiTom Nash, CFA StrategistHSBC Bank Australia Limited thomas.nash.au+61 2 9084 2433Piran PhippenCEEMEA Rates StrategistHSBC Bank plcpiran.c phippe

9、n+44 20 7991 5693Low yielders: Receiving rates(receive 5yr ND IRS) is our strongestconviction but we are also bullish on local rates in Thailand (Long 10-year ThaiGBs), Israel (Rec ILS5yr IRS vs pay PLN10yr IRS) and Hungary (long 5yr HGBs on ASW basis). In contrast, we are more cautious on local rat

10、es in Poland and Czech where,in our view, the current pricing of monetary policy easing has gone too far.Issuer of report: The Banking Corporation Limitedand ShanghaiDisclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and w

11、ith the Disclaimer, which forms part of it.View HSBC Global Research at:EM RatesPolicy pills vs infectious inversionFixed IncomeRatesGlobal Emerging Markets获取报告1、2、3、每周群内7+报告；当日华尔街日报、4、行研报告均为公开利归原作者所有，起点财经仅分发做内部学习。扫一扫关注 回复：加入“起点财经”群。Fixed Income Rates4 July 2019ContentsEM low yielders Onshore China

12、Czech Republic PolandHungaryKorea242425262728Local bonds barometerTop Trades34Clients questions on EM5EM RatesOmens of yield curve inversionCurve inversion and domestic growth impulseImpact on asset-swap spreads and foreign flows66Andean marketsColombia Chile292930910Frontier marketsArgentina Sri La

13、nka313132EM hard debtA game of two halves Shifting risks for spreads111112Recent EM publications33EM FX: Quality over quantity13Disclosure appendix40EM EconomicsCapital flows to EM1414Disclaimer43EM high yieldersMexico Brazil Russia South AfricaThe Philippines IndiaIndonesia MalaysiaTurkey1515161718

14、19202122232Fixed Income Rates4 July 2019Local bonds barometerTable 1. Emerging Markets Local Currency Bonds OutlookBrazilMexicoIndonesiaIndiaChina*MalaysiaRussiaSouth AfricaTurkey10-year nominal yield (%)7.467.577.346.923.223.657.418.8215.72Correlation to UST*0.08-0.09-0.020.490.440.10-0.02-0.10-0.0

15、7Trend in foreign flowsMonetary policy biasFX outlookTable 2. Emerging Markets Local Bonds Value MatrixBrazilMexicoIndonesiaIndia*ChinaMalaysiaSouth Africa*TurkeyRussia*FX adequacy ratio - IMF Ratio of reserve/ARA metric (November 2018). *FY19/20 refers to 1 April 2019-31 March 2020 for India and So

16、uth Africa.Source: HSBC forecasts3Beta computed using a regression between the yields of 10-year government bonds and US Treasuries over the past three months.External factorsFX adequacy ratio*FX reserves (USDbn)376.5173.7118.4398.63,101.098.441.373.5394.9Short-term extern

17、al debt (% of reserves)Import coverage ratio (months)8.63.050.323.342.590.269.8180.113.99.33.921.2Macro variablesCurrent account balance (FY19e, % of GDP, HSBC forecasts)Fiscal balance(FY19e, % of GDP, HSBC forecasts) Household debt (% of GDP)Headline CPI (last, % y-o-y)HSBI fore

18、casts (end-2019e, % y-o-y)-0.9-1.6-2.8--2.7-5.533.6-1.1-3.95.5-4.6-2.7-2.0-3.4-2.8-3.41.728.216.017.011.352.666.314.817.4Positioning & sensitivitySensitivity0.18-0.11-0.020.570.330.05-0.13-0.87-0.02Latest foreign ownership of local gov

19、ernment12.7%30.7%39.0%3.5%8.2%22.2%38.7%13.2%27.8%debtForeign ownership (a year ago)12.0%32.0%37.8%3.8%6.7%26.4%41.4%20.3%32.3%*Correlation computed using daily yield data over the past three months. Trend in foreign flows is based on the latest monthly flows for the country.Based on HSBC FX Researc

20、h (Emerging Markets FX) and HSBC Economics forecasts for end-2019. Data include government + corporate flows.*Monetary policy outlookbased on the Reserve Requirement Ratio. Source: HSBC forecastsView on local bondsBullishBullishNeutralNeutralBullishNeutralBullishMildly BullishBearishFixed Income Rat

21、es4 July 2019Top Trades1. Long Russia OFZ6.5 Feb248.58.04Strong fundamentals and a benign inflation outlook4Risks: Increase in geopolitical risks7.57.06.5Jan-19Mar-19May-19EntryJul-19TargetRussia OFZ6.5 Feb242. Long Brazil NTNF-20279.59.08.58.07.57.06.54Positive news on social security reform likely

22、 to lower real rates4Risks: Delay in passing of social security reformApr-19May-19Jun-19EntryJul-19TargetBrazil NTN-F 20273. Long South Africa SAGB8.75 Feb35 (R2035)10.04Attractive valuation and supportive external environment4Risks: Escalation of Eskom troubles9.59.08.5Apr-19May-19Jun-19EntryJul-19

23、TargetSAGB8.75 Feb354. Long Mexico Mbono8.5 May295. Long China 30yr CGB6. Long Philippines RPGB4.875 Jun217. Pay Czech Republic CZK1yr1yr IRSSource: Bloomberg, HSBC. *For full details of these and other open trades including risks and rationale, please refer to Table 3 on page 344%Entry:1.61%Target:

24、 2.00%Stop: 1.35%Entry date:25-Jun-19Current: 1.77%Entry:5.92%Target: 4.60%Stop: 5.30%Entry date:13-Mar-19Current: 4.88%Entry:3.88%Target: 3.55%Stop: 4.30%Entry date:5-Jun-19Current: 3.78%Entry:7.57%Target: 6.90%Stop: 7.85%Entry date:1-Jul-19Current: 7.41%Entry:9.66%Target: 9.00%Stop: 10.00%Entry da

25、te: 25-Jun-19Current: 9.49%Entry:8.06%Target: 7.00%Stop: 7.80%Entry date:3-Jun-19Current: 7.22%Entry:8.18%Target: 7.00%Stop: 7.68%Entry date:28-Feb-19Current: 7.27%Fixed Income Rates4 July 2019Clients questions on EM1. How would you position in EM rates following the US-China trade truce at the G20

26、summit?We have been more selective in our approach towards EM rates over the last two months, only favouring selected EM high- yielders given the potential for trade-related headlines to adversely affect investors risk-taking appetite. We see little reason to change this approach even with the lates

27、t US-China trade truce. Both countries will have to collectively cross high hurdles before any deal can be reached. Specifically, Chinas three demands: i) that the US sets a reasonable amount for Chinas purchase of US goods, ii) that existing tariffs need to be removed and iii) that any deal needs t

28、o be balanced, equal and mutually beneficial, have been well broadcast to its domestic audience, which means that it will be hard for top officials to back away from them. Yet, it is difficult to envisage the US rolling back on existing tariffs without first seeing progress on Chinas compliance with

29、 any trade deal. Furthermore, US Trade Representative Robert Lighthizer has reportedly stated toChinasLiu He that a balanced trade deal would not happen (CNBC, 27 June). Given the possibility that the latesttruce is yet again temporary, the uncertainty for real businesses remains and difficult suppl

30、y chain relocation decisions will still have to be made. This implies economic data continue to trend weaker and lead to lower rates. The outlook for EMcurrencies is less clear, given theing forces of possible monetary easing in the US and slowing EM growth. This iswhy we think a selective approach

31、towards EM high-beta names remains warranted. Specifically, we are bearish on Turkey, neutral on Indonesia, India and Malaysia, and stay bullish on Brazil, Russia, Mexico, South Africa and the Philippines.2. Will Chinas latest move to allow local governments to use special bond issuance proceeds as

32、capital for infrastructure project financing be successful in boosting infrastructure investment growth?On 10 June, Chinas State Council released a circular permitting local governments to use the proceeds from their project bond issuance as capital for qualified infrastructure projects, enabling th

33、em to leverage. The central government is hoping to stimulate infrastructure investment, which increased by only 4% yoy in the first five months of 2019, compared with 9.4% yoy during the same period in 2018. This is helpful to local governments, which have seen a shortfall in land sales revenue. As

34、 of May 2019, local governments year-to-date land sales revenue is RMB130bn, or 6% lower than the same time last year.A key limitation of this new policy is banks ability to extend project financing. This ability is constrained by capital adequacy requirements and we note that the top-level push ear

35、lier this year for banks to lend more to small and medium-sized enterprises has already increased banks risk exposure. As such, while this recent policy is positive for economic growth, we are not overly optimistic. Specifically, our industrial analysts expect infrastructure growth to rise from the

36、existing 4% yoy to about 6% yoy, in line with the GDP growth target.3. What are the signposts to watch for Mexico, following the recent sovereign rating downgrade?On 5 June, Fitch Ratings lowered Mexicos sovereign rating from BBB+ to BBB (stable). The rating agency subsequently moved to lower the ra

37、ting of state-owned oil company Pemex to sub-investment grade BB+ (negative) from BBB-. Fitch cited the governments plans to build a new refinery as one of the key challenges for the companys outlook given the uncertain costs and timing for completion. It also noted that the companys free cash flows

38、 are likely to be negative for 2019 and 2020. Separately, Moodys has kept its ratings for Mexico and Pemex at A3 and Baa3 respectively, but changed the outlook on both names from stable to negative. The risk is that if Moodys were to downgrade Pemex to junk status, some investors may be forced to se

39、ll Pemex bonds if their mandate only allows investments in bonds that are rated investment grade by at least two of the three major rating agencies. Standard & Poors rates Pemex at BBB+ (negative).To reverse the situation at Pemex, we think the company needs to outline concrete plans to reduce its t

40、ax bill as well as to lift oil production, which has declined over the last 14 years. If the government were to propose more benign tax structures for Pemex, this could allow it to invest and help heal its balance sheet. These announcements should be rolled out during the summer and early September

41、(Source: Bloomberg, 23 May). Investors will also be looking for the progress on Pemexs refinancing plans after Chief Financial Officer Alberto Velazquez stated the company would refinance USD2.5bn of outstanding bonds this year (Reuters, 22 June). Separately, investors should pay attention to the pr

42、oduction data, after Mays data revealed that Pemexs production level is still falling. However, Mexicos President Andres Manuel Lopez Obrador has stated the information he has received indicates production has stabilised (Reuters, 25 June). Given that rating agencies have recently taken action, sugg

43、esting any follow-up move is unlikely in the near term, we think there is room for tactical spread tightening in Mexico. We remain long Mbono 8.5 Dec 2029s (target: 6.90%, stop: 7.85%).5Fixed Income Rates4 July 2019EM RatesEM local rates are being pulled by opposing forces policy easing vs slowdown

44、concerns reinforced by US curve inversionOpportunities for duration extension in certain EM high yieldersPosition for wider bond-swap spreads and strategic receivers in EM low yieldersuuuOmens of yield curve inversionAndr de Silva, CFAHead of Global EM Rates ResearchTheand ShanghaiThe differential b

45、etween US 3-month T-bill and 10-year Treasury yields first dipped into negative territory back in March 2019 and over the past month has remained inverted (Figure 1). This is the most useful term spread for forecasting recessions, without any adjustment for an estimate of the underlying term premium

46、. Whilst there is a debate about the validity of US curve inversion as a signalling tool for a US recession given various distortions, the underlying signal of a late economic cycle is a potent one and curve inversion is also spreading across EM (Figure 2). Our analysis indicates that over the past

47、15 years, 17 out of 29 episodes of curve inversion in major EM swap markets were a precursor to a recession. Such results can be more mixed but US curve inversion has a significant bearing, including on EM.We have consistently maintained that a Fed easing cycle, at least initially, is not necessaril

48、y good for EM rates, as the trigger is the weakening in global economic activity and the US is only lagging thisBanking Corporation Limitedandre.de.silva.hkCurve inversion is also spreading across EMcycle. Within EM rates, this provides an opportuto receive local rates outright in low beta marketsto

49、 position for a growth down cycle, but also to stay selectively cautious on duration exposure in EM high yielders and positioning for an underperformance of local bonds vs swaps.There is also uncertainty about whether early monetary medicine from the Fed, with its strong dovish guidance, including a

50、 prescription from the Fed Chair that “an ounce of prevention is worth a poundFigure 1. Yield curve inversion in US Treasury yield curve; EM local bond curves yet to follow on aggregateFigure 2. EM swap curves have inverted led by US curve inversion2.25004003002001000-100-200-30092.1872.061.951.8Jun

51、-91Jun-95 Jun-99 Jun-03 Jun-07 un-11BRLUS 10yr-3m Treasury curveEM locSource: Bloomberg, HSBC *based on average spread between 10- and 2-year local government bond yields in India, Indonesia, Brazil, Mexico, Russia, South Africa and TurkeySource: Bloomberg, HSBC6bpSwap rate (%)USD(LHS1)Fixed Income

52、Rates4 July 2019of care”, and policy easing accelerating elsewhere, especially in EM, will dampen the late cycle characteristics and associated deteriorating credit quality in EM. We examined the latter specifically in May 2018 for hard currency EM spreads and highlighted that spreads are susceptibl

53、e to sharp widening post US curve inversion and especially during subsequent curve re-steepening (EM External Debt: Entering the twilight zone, 15 May 2018). On average, the lag from the start of the curve inversion to the trough in EM spreads is +8 months, ranging from -1 month to +16 months across

54、 the periods. In all seven cases that we have considered (going back to 1970), spreads do not peak until the recession is well underway, an average of 22 months after the initial inversion of 10-2yr Treasury yield curve. Moreover, the strongest and most significant spread widening impulse occurs aro

55、und 15 months after the curve flattens into inverted territory, tending to coincide with the period ofyield curve re-steepening (Figure 3).This should also apply to EM high yielders in the local government bond market to a degree. There are, however, more counter forces for EM local rates. On the on

56、e hand, declining US Treasury yields and policy easing in EMs are supportive of lower EM local bond yields. In contrast, deteriorating credit quality or a higher risk premium for the threat of investors de-risking could be increasingly reflected as higher yield at the long-end of the curve. This also expl