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Australia’s economic recovery gained momentum in the first quarter of 2021; domestic demand, exports, employment and consumer confidence rebounded more strongly than expected.
The Reserve Bank of Australia said it believes significant spare capacity will keep inflation muted for the foreseeable future and reiterated a commitment to keep base rates low.
Global reflation concerns pushed bond and money market yields higher and steepened curves during the quarter.
Economic data released in Q1 was strong, evidence the Chinese economy has benefited from robust domestic and international demand.
With growth returning to pre-pandemic levels, the government pivoted from focusing on economic stabilization to prioritizing long-term development and urbanization.
Repurchase agreement (repo) rates spiked ahead of Chinese New Year and then normalized; the short end of the Shibor (Shanghai Interbank Offered Rate) yield curve steepened.
The People’s Bank of China confirmed its “tight-balanced” liquidity stance.
Hong Kong’s nascent recovery stalled, as improving business confidence and exports were offset by weak domestic demand and rising unemployment.
Another COVID-19 outbreak necessitated prolonging social distancing measures, prompting the government to announce additional fiscal stimulus to support growth.
While reflation expectations pushed global bond yields higher during the first quarter, excess local liquidity continued to drag Hong Kong Interbank Offered Rate yields lower.
Continued fiscal support, robust exports and successful COVID-19 containment measures supported a recovery in economic growth.
Until vaccines are rolled out more widely and international travel resumes, weak domestic demand and muted tourist spending will likely thwart a full recovery.
Monetary policy remained unchanged and the Singapore dollar nominal effective exchange rate was stable during the quarter, although the global reflation trade pushed Singapore dollar bond yields higher.