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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.

Lastest update: 14 August 2023.

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

Policy expectations have stabilized as market participants price in a more resilient economy. High-for-longer inflation is also showing up in 10Y breakevens. As expectations of the end of the Fed cycle builds, increased optimism has also led to an increase of term premium.

SGD Rates

The key factors impacting SGD interest rates have been relatively stable compared to three months ago. SGD liquidity is still relatively flush.

HKD Rates

The USDHKD is no longer hugging the top of the band. As FX pressures ease, HIBOR has also settled lower relative to USD rates.

EM Rates Valuation Indicator (ERVI)

Lastest update: 14 August 2023.

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 EM space is skewed towards overvaluation. That said, in the near term, risk sentiments towards EM are generally positive and conducive for EM bonds to rally further against US Treasuries. Inflation differentials could keep improving, as US inflation stays stickier vs broad disinflation trend in most of EM. The impact of weaker external demand and energy prices on EM current accounts would vary across EM economies.

Our ERVI suggests that Malaysia, Thailand, Korea, Mexico and India are extremely overvalued relative to US Treasuries while Brazil is undervalued.

Click on individual country bars to see time series.
Click on individual country bars to see time series.

GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)

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