Foreign media: Oil price-driven inflation concerns are reshaping the Asian bond yield curve

What will AI and government fuel subsidies mean for the policy direction of Asian central banks?

【Global Finance News】According to Bloomberg, the yield curve of Asian emerging market bonds may experience a turning point, with analysts believing that the recent surge in borrowing costs is likely to end. Investors are beginning to price in rate hikes to counteract inflation caused by rising oil prices.

Analysts currently expect this trend to reverse, with the yield curve becoming steeper. They believe that government fuel subsidies will play a significant role in addressing inflation, reducing the need for central banks to adopt hawkish measures.

Goldman Sachs strategist Danny Suwanapruti and others wrote in a report last Saturday: “We believe that the Asian interest rate curve is more likely to show a turning steepening from now on.” They noted that the recent flattening of the yield curve and market expectations that the region’s central banks will favor fiscal support over monetary policy to combat inflation support this view.

Wee Khoon Chong, strategist at Bank of New York in Hong Kong, said: “The flattening of the yield curve may be coming to an end because we believe that rate hikes are not an effective strategy to deal with high inflation caused by supply shocks. If there is any change, it’s that as the market may eventually lower expectations for rate hikes in the Asia-Pacific region, policy focus will soon shift from fighting inflation to supporting growth.” (Wen Hui)