US extends Huawei ban, PM Johnson writes to EU to remove Irish backstop
Against the dollar, Thai baht on the previous trading day, on a sideways trend, closed at 30.86.
The US extended the ban on Huawei for 90 days to smoothen US tech businesses’ transitioning away from doing transactions with the Chinese tech giant. This certainly boosted stocks to rebound. However, the US also added 46 more subsidiaries and affiliates of Huawei to the national security’s blacklist, raising the total on the list to more than 100.
Amid President Trump requesting a 100-bps cut from the Fed for better US economy and stimulating the global economy, Fed Chairman Powell will have a chance to communicate with markets on Friday at the Jackson Hole symposium after stating on 31 July that reducing rates was policy adjustment without necessary sequential rate cuts. Meantime, Boston Fed President Rosengren, although realizing global slowdown, demanded more evidence to back rate cuts, while mentioning that unnecessary cuts come with costs, especially financial instability.
China’s PBoC would establish a new loan prime rate (LPR) to be less controlled but more connected with market mechanism. The rate, currently at 4.31%, is expected to be lower to 4.24% to stimulate the slowing economy.
PM Johnson wrote to EU to remove the Irish backstop but proposed alternative arrangements to ensure no hard Irish border. This is because if the Irish backstop takes effect, the UK will need to obey some EU rules. Nonetheless, previously, the EU insisted not to renegotiate a new Brexit deal with the UK.
Euro area’s inflation sill remained subdued. The bloc’s headline inflation in July was 1% yoy, lowest since late 2016, while the core inflation was 0.9% yoy.
Japan’s exports kept worsening. The exports growth, -1.6% in July, stayed below zero for eight months consecutively. Meanwhile, its trade balance became negative in July, JPY -249.6 billion.
Moving around 30.81-30.87 this morning, USDTHB could be between 30.79-30.89 today.
US treasury yields keep bouncing on lessening recession fears
Thai benchmark government bond yield (LB28DA, 9.3 years) on the previous trading day was 1.49%, +5.25 bps. Meantime, the latest closed Thai and US 10-year bond yields were 1.52%, +3.21 bps, and 1.60%, +5 bps, respectively.
Since recession fears eased on Huawei’s ban extension and possible economic stimulation from Germany and China, US treasury yields and other countries’ government bond yields kept ticking higher.
On yield spreads between long- and short-dated bonds, US 10-year-3-month spread inversion has been existing for 67 days in 2019. 10-year: 1.60% v 3-month: 1.94%, spread: -34 bps; while, US 10-year-2-year treasury spread: +7 bps. Thai 10-year-2-year government yield spread was 7.98 bps.
Thai benchmark government bond yield (LB28DA, 9.3 years) could be between 1.48-1.52% today.
Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times, ING, Investing.com, Reuters, South China Morning Post