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: 15 April 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
Between firm nonfarm payrolls and worries about sticky inflation, USD rates have continued to their upward march this year. Amidst resilient data and the rise in oil prices, inflation expectations have crept up. Concomitantly, the market is adjusting to a calibrated easing approach for the cycle as rate cut bets get pared.
SGD Rates
Longer-term SGD rates were generally brought higher by USD rates as the market rethought Fed expectations and the longer-run neutral rate for the US. SGD liquidity and curve steepness were fairly stable. There was a bit of FX pressure as rising USD rates brought about a firmer USD.
HKD Rates
HIBORs have been easing as quarter-end effect fades. Yet, the spreads against the SOFR counterparts should remain steady. Referencing to the 2019 rate cut cycle, the spread should hover around -50bps if the rate cut cycle is relatively modest.
EM Rates Valuation Indicator (ERVI)
Latest update: 15 April 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. Positive values 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
The fading of imminent Fed fund rate cut expectation has rendered EM govvies less attractive on a relative basis. Should the Fed be on track with 3- 4 cuts, EM govvies should be well supported down the road. Within Asia, we continue to favour CNY and KRW govvies. Between slow growth and high real interest rates, we expect further monetary loosening from both PBOC and BOK, which when delivered, should drive yields lower.
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The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the âCompanyâ). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
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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.
