Date: Sep 19, 2015
The US Federal Reserve’s decision to delay raising interest rates has opened a policy window for Taiwan and South Korea to cut borrowing costs as the risk of outflows drops.
Sovereign bonds from the two Asian economies rallied yesterday after the Fed refrained from raising borrowing costs, while signaling a move is still likely this year. Monetary tightening in the US would push up US Treasury yields, exacerbating outflows from developing nations. Taiwan and South Korea are both struggling with a slump in exports amid a slowdown in China, their biggest market.
“A delayed hike gives Asian central banks more room to support liquidity,” especially Taiwan and South Korea, Societe Generale SA Hong Kong-based head of Asia ex-Japan rates strategy Frances Cheung (張淑嫻) said. “Even if it’s not an explicit rate cut, they can at least maintain loose liquidity.” [FULL STORY]