In Brief

Australia

• 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.
  

China

• 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

• 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 

• 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.