Global Macro Commentary | North America: July 27: Oil-Led Rates Rally

Research evidence excerpt

Global Macro Commentary | North America: July 27: Oil-Led Rates Rally

UpdateMthe capital flow measures. INR strengthened 0.7%, aided as well by

unconfirmed reports of increased RBI USD sales in the offshore and onshore

FX markets, while the INR NDOIS curve bull-flattened (5y: -15bp) and 10y IGB

yield fell 5bp as Finance Minister Sitharaman said on Sunday that there is no

need to adjust the budget numbers for now and the RBI injected less

liquidity than planned via a 3-day VRR auction (INR127bn; Planned:

INR750bn). THB appreciated ~0.4% amid a ~1.1% rise in gold prices, while

Thailand rates bull-flattened with the 5y NDTHOR yield down by 5bp.

• Elsewhere in Asia, SGD fell ~0.1% while 2-10y SGD IRS yields fell ~5bp as

the MAS increased the slope of the S$NEER policy band “very slightly”.

KRW underperformed, weakening ~0.7% amid $2.1bn foreign outflows from

local equities even as KOSPI closed 1.0% higher. Korea rates outperformed,

with 10y NDIRS yield shifting 9bp lower in a bull-flattening move. IDR also

weakened ~0.3% back to above 18000 per USD and 10y IndoGB yield rose

2bp following BI Governor Warjiyo’s resignation, even as the authorities said

that economic policy is unchanged.

• Oil prices fell sharply as the pause in US-Iran hostilities pushed Brent

below $90/bbl, supporting a broader risk-on tone across LatAm assets. In

FX, CLP outperformed, appreciating ~0.86% alongside the improvement in

global risk sentiment, while BRL underperformed, depreciating ~0.56%. In

rates, most curves rallied. The Brazilian DI curve outperformed, with the Jan

28 DI rallying ~14bp as lower oil prices supported the move, while the COP

IBR 2y rallied ~13bp. Peru's soberanos were the weakest-performing curve,

trading broadly flat after President-elect Keiko Fujimori named former