Asia markets are trading mixed after the hawkish Fed, where the FOMC statement and Fed Chair Powell hawkish remarks and with its dot-plot hike projections steepened. At the same time, Evergrande’s credit theme and Japanese closure add to the indefinite mood.
On the Monetary Policy front, the US Treasury yield curve bear-steepened in the wake of a hawkish Fed Chair Powell’s comments during the FOMC Presser as he suggested the potential for a bond taper completion by mid-2022. That also supported the US Dollar, which strengthened against G10 and EMFX pairs for the rest of the Wall Street session. Market’s will now be looking for signals of higher bond tapering pace after November and income inflation and employment data, looking for any indications that could drive the FOMC members to change their policy framework and start the lift-off sooner than expected.
On the China front, Evergrande stock started today’s session gaining more than 28%. Local reports suggested that the Chinese Government views that the CCP is currently finalising a deal to see Evergrande restructured into three separate entities. A deal could be announced in days. Also adds to the positive sentiment, reports that Chinese commercial banks are making public statements to announce that their risk exposures to the debt-ridden Evergrande are controllable. Participants will be watching the theme very close through the session, looking for comments surrounding today’s scheduled $83.5mln coupon payment on a US$-denominated bond issued.
