Interest Rates Analytics
Identify key factors driving interest rates. Get insights from our rates valuation monitor.
Welcome to interest rate analytics. Here we provide two sets of visualisations. First, we decompose the key macro drivers of interest rates in three key markets- Singapore, Hong Kong, and the US. In the second set of visualisations, we showcase our Emerging Markets Rates Valuation Indicator, which provides buy/sell/hold signals on a dozen countries' government bonds.
Breakdown of drivers for USD, SGD and HKD interest rates.
Latest update: 4 September 2024
For the US, we have identified 4 factors - liquidity, policy expectations, inflation expectations and term premium - that can explain movement in USD rates. Each factor is scaled from zero to 100. Higher figures point to higher upward pressure on USD rates.
For Singapore and Hong Kong, we look at the steepness of the USD curve, relative liquidity and FX dynamics. Each factor is calculated as standard deviation from mean. Higher figures point to higher upward pressure on the respective rates.
USD Rates
Cooling inflation expectations support the market’s view of imminent Fed cuts. Liquidity conditions are still ample. However, the term premium has increased significantly as the market priced in an aggressive Fed cut cycle.
SGD Rates
Factors impacting SGD rates have remained largely stable with SORA OISs dropping in tandem with SOFR OISs. Steepening is at play in anticipation of Fed Fund Rate cuts.
HKD Rates
A weaker USD, and easing liquidity conditions amid fading demand for HKD from the stock market, are driving HKD rates lower.
EM Rates Valuation Indicator (ERVI)
Latest update: 4 September 2024
How to interpret ERVI values
ERVI estimates the extent of over or under-valuation of 10Y EM local-currency bonds, based on fundamentals such as external funding and inflation risks. A Positive value indicate that bonds are rich (or over-valued), while negative values indicate that bonds are cheap (or under-valued). Investors can use our ERVI to make positioning decisions for their portfolios, by going underweight on the richer bonds and going overweight on the cheaper bonds.
For more in-depth description on the workings of our model, please refer to Introductory Report
Current Valuations
EM currencies and rates are taking a breather alongside stronger rate cut expectation. Within Asia, we continue to favour CGBs, Indo GBs, IGBs and KTBs. Expectations of PBOC’s and BOK’s rate cuts are driving the govvies yields lower, while increase in IGBs weightage in the JPM index is spurring inflow.
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DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queenâs Road Central, Central, Hong Kong SAR.
