Bond Yiled

U.S. and European bourses rebounded last night while Asia stocks takes reverse turn extending loss in today’s trading session amid fresh concern on rising bond yield. The MSCI Asia Index dropped by 0.76% while MSCI US Equity advanced by 2.52%. S&P 500, Nasdaq 100 and European equities futures dipped. Bourses in Japan and Hong Kong led loss in the region while SET index set upbeat on gradual domestic reopening gaining 4.75 points to 1628.55. The U.S 10 year advanced to 1.547 while 30-year yield reached 2.143, highest since June amid rising energy price and inflationary pressure. The 10-year breakeven rate climbed 2.485 highest since June which indicates traders’ expectation on annual inflation over the next decade. The dollar ticked up further pressuring Asian currencies with Thai baht trading at 33.895 (+0.75). Markit US services PMI and ISM services index both showed higher growth than expected of 54.9% and 61.9% respectively and in combination to the soaring energy prices adds to the expectation of U.S Federal Reserve to start bond purchases. New Zealand earlier today increased interest rate in seven years by 50 basis points to 0.5 to tame rising inflation further adding to the sentiment of what central banks globally are anticipating. Both FED and traders are closely watching initial jobless claim, non-farm payroll and unemployment rate this week which could make the FED give some indication on its upcoming asset purchase program. Although traders have their risk mode on with expectation on slower but gradual economic recovery and monetary tightening, however underplaying the surge in energy prices which could over the long run add to higher inflationary pressure. Crude oil price is seven years high while natural gas in U.S slipped shortly amid U.S to limit export on LNG for domestic consumption. However, ICE NBP natural gas inched up by 19.54%. In Thailand’s context natural gas is the main fuel (54%) for the country’s power production with Energy Regulatory Commission (ERC) expects gas price through September – December 2021 would increase by THB 21/mmbtu to THB 271/mmbtu. This would lead to higher energy cost lowering margin for small power producer (SPP) supplying gas to industrial customers. B Grimm Power (BGRIM TB), Global Power Synergy (GPSC TB) and Gulf Energy Development (GULF TB) has the significant exposure to SPPs and sensitivity to natural gas price does not contribute to higher impact.