In Brief

Australia

• 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.

China

• 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

• 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.

Singapore 

• 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.