Deutsche Bank-Asia Macro Strategy Notes Bond Demand-Supply Monitor-117176360

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 11/08/2025 05:05:14 GMTDistributed on: 11/08/2025 05:05:14 GMT11 August 2025Highlights from this edition of our monthly Asia bond demand-supply monitor;1. We expect some upward adjustment in yields for newly issued CGBs as a result of the recent VAT changes, though the impact on bank demand for bonds will likely be limited given poor loan growth.2. Rising lifer premiums and EPF payrolls, together with changes in regulation, should support the ultra-long end of the IGB curve; we are long the 30Y.3. Front end IndoGBs continue to benefit from declining SRBI rollovers, but we are still lacking pension fund demand for the back end.4. Despite stepping up the pace of issuance, the run rate for KTBs continues to be below its average in recent years.5. The strength of retail bond issuance clears the last major supply hurdle for the year, and supports our constructive view on RPGBs.6. Strong domestic demand continues to flatten the ThaiGB curve with secondary market bids outstripping tactical pull back in auction participation.ChinanImpact of VAT changes. The MoF has announced that VAT will be levied on CGBs, LGBs and financial bonds issued from 8 August onwards. Asset managers will be subjected to a 3% VAT rate, while the proprietary trading of financial institutions (e.g. banks) will face a 6% rate. We estimate that CGB yields will likely increase by 4-13bp in response to these changes. Despite the higher VAT, the overall impact on banks' demand should be limited given relatively weak loan growth (compared with the pace of nominal GDP growth), and which should continue to anchor the front end of the bond curve. See Asia Macro Strategy Notes: The implication of VAT resumption on bond market for details.nKey auctions: 3Y CGB auction on 14 August; 10Y and 30Y CGB auction on 22 August. These are the three new CGB issuances schedule for after the latest change in VAT regulation.IndianLife insurance first premiums and EPF payrolls continue to rise strongly on a sequential basis. We show in Figure 2 and Figure 3 that the IGB 10Y/30Y curve is not yet reflecting this reality and expect the 10Y/30Y Figure 1: Government bond yields are estimated to rise by 4-13bp to adjust for VAT46810121402468101214162Y3Y5Y7Y10Y 20Y 30Y 50Y5Y7Y10Y 15Y 20Y 30YLGBBpChange in bond yields to adjust for the VATVAT 6%3%AverageSource : Deutsche Bank, Bloomberg Finance LPJoey ChungStrategist+65-6423 8298Hazel LaiMacro Strategist+852-2203-6150Vaninder Singh, CFAMacro Strategist+65-6423 8947Perry KojodjojoStrategist+852-2203 6153Sameer GoelMacro Strategist+65-642-36973Bryant XuStrategist+65-6423 5558Deutsche Bank AG/SingaporeIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Deutsche BankResearch Asia Fixed Income Asia Macro Strategy Notes Date Bond Demand-Supply Monitor11 August 2025A