Trump downplays recession fears, Fed and ECB meeting minutes this week

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Trump downplays recession fears, Americans increasingly back free trade, Fed and ECB  meeting minutes this week, Thailand grows slowest since 2014

Against the dollar, Thai baht on the previous trading day, on a sideways trend, closed around 30.90, weaker than the previous week, 30.73.

Despite recession concerns in bond markets, the Trump administration saw only a trivial risk of probable US recession and insisted no damage to the US from the US-China trade dispute. Meanwhile, President Trump said that US-China trade negotiations were ongoing well but he was not ready to make a trade deal with China yet.

Nevertheless, US citizens decreasingly supported President Trump’s economic handling, while increasingly backed free trade, a new NBC News/Wall Street Journal poll says. 49:46 of Americans still approved Trump’s economic management, compared to 50:34 in July 2018. Meanwhile, 64:27 at present supported borderless trade, whereas merely 57:37 during Trump’s early presidency. Besides, President Trump consulted with the CEOs of JP Morgan, Bank of America, and Citigroup. The CEOs said that consumers were doing fine and could be better if the US-China trade war was resolved. They also said that the trade war was harming US capital spending as uncertainty reduced corporate confidence. Besides, they commented that Fed’s further 25-bps cut, which has already been priced in, would not alter capital flows.

After US tech firms were reportedly to be provided with a 90-day license to do businesses with Huawei, President Trump halted the decision and said that he did want to do businesses with Huawei owing national security threat.

After Germany’s economic growth of Q2 became negative QoQ, while lowest since 2013 YoY, Germany’s Ministry Finance, pressured to reconsider the balanced-budget policy, was preparing an extra fiscal stimulus package worth EUR 50 billion, or about USD 55 billion.

The Independent’s survey, by BMG Research, shows that only 34% support a no-deal Brexit on 31 October if necessary, while 49% back extension, cancellation, or new referendum. Meantime, only 19% believe that PM John would be able to renegotiate with the EU and obtain a new deal.

Thailand’s Q2 economy grew 2.3% YoY, missing 2.4% market expectations, mainly on deteriorations in goods exports and tourism. This is the slowest pace since 2014.

Interesting economic releases and events are as follows. US: Fed’s FOMC July-meeting minutes, Jackson Hole Economic Policy Symposium with Fed Chair Powell’s Speech, existing home sales, new home sales. Europe, euro area: ECB Monetary Policy Meeting Accounts, manufacturing PMI, inflation. Germany: manufacturing PMI. Japan: trade balance. Thailand: exports, imports, trade balance.

Moving around 30.85-30.90 this morning, USDTHB could be between 30.6-31.1 this week and 30.82-30.92 today.

 

US treasury yields rebound, US possibly to issue 50-year and 100-year debts

Thai benchmark government bond yield (LB28DA, 9.3 years) on the previous trading day was 1.44, -0.87 bps. Meantime, the latest closed Thai and US 10-year bond yields were 1.48%, -0.87 bps, and 1.55%, +3 bps, respectively.

US treasury yields rebounded amid Germany reportedly to issue more debt and provide a fiscal stimulus. After 30-year yield fell and reached its record low, the US was considering to start borrowing longer by issuing 50-year and 100-year debts.

China’s PBoC said it would improve the mechanism used to form the loan prime rate (LPR) from this month, in a move to further lower real interest rates for firms as economic stimulation and part of broader market reforms.

On yield spreads between long- and short-dated bonds, US 10-year-3-month spread inversion has been existing for 66 days in 2019. 10-year: 1.55% v 3-month: 1.87%, spread: -32 bps; while, US 10-year-2-year treasury spread: +7 bps. Thai 10-year-2-year government yield spread was 6.38 bps.

Thai benchmark government bond yield (LB28DA, 9.3 years) could be between 1.40-1.48% this week and 1.43-1.45% today.

 

Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times, ING, Investing.com, Reuters, South China Morning Post

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