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Economic data remained strong during the second quarter, as robust exports and successful containment of the Covid-19 pandemic boosted business and consumer optimism.
Proactive fiscal policies and low interest rates fueled a rebound in the property and services sectors, helping unemployment rapidly decline to pre-Covid levels.
With inflation and wage growth still subdued, the Reserve Bank of Australia (RBA) pledged to keep base rates unchanged until at least 2024, pushing short-tenor bank bill swap (BBSW) yields lower and steepening the yield curve.bond and money market yields higher and steepened curves during the quarter.
Economic growth moderated in the second quarter as the post-pandemic export surge faded and tighter fiscal restrictions dampened domestic demand and consumer confidence.
Several localized Covid-19 outbreaks contributed to the weaker consumer data but helped accelerate China’s vaccine rollout.
The government noted the uneven recovery, and with inflation in check, the central bank committed to a more neutral monetary policy stance, supporting a modest decline in interest rates and further flattening of the yield curve.
Hong Kong’s economy benefited during the second quarter from robust Chinese and international growth and continued government support, which encouraged a recovery in business confidence and local demand.
Easing of social distancing and lockdown restrictions during the period triggered a rebound in the services sector and helped reduce unemployment.
The Federal Reserve’s (Fed’s) commitment to keep base rates low, combined with excess local liquidity, continued to drag HIBOR yields lower throughout the quarter.
Singapore’s economy continued to recover in the second quarter, supported by improving manufacturing, services and construction activity, although consumer demand was negatively impacted by a Covid-19 resurgence and partial lockdown.
At its semi-annual meeting in mid-April, the Monetary Authority of Singapore (MAS) left key parameters of its monetary policy unchanged but revised up growth and inflation targets.
Fading reflation concerns and the Fed’s commitment to keep base rates low helped drive Singapore swap offer rate (SOR) yields lower and flatten the curve during the quarter.