ISMS 14: Regional Interest Rates - Low in Asia, Egypt and Frontiers on Fire

Developed Market Regions - ST rates about to peak, LT rates are falling, inverted yield curve in DM Americas and Europe widened

Interest rate overview

• DM Americas 3m yield 4.8%, DM Europe 3%, DM Pacific much lower at 1.1%
• DM Americas 1yr yield 4.6%, DM Europe 2.8%, DM Pacific same as 3m yield at 1.1%
• DM Americas 10yr yield 3.5%, DM Europe 2.9%, DM Pacific 1.4% is higher than 3m and 1yr yield, normal yield curve

Year-on-year changes

• Biggest rise of 3m yield in Developed America
• World 3m yield was up 3.2ppts, DM Americas up 4.3ppts, DM Europe up 3.3ppts, DM Pacific up 1.1ppts
• Following 3m yield, 1yr yield YoY changes were most prominent in DM Americas and DM Europe
• World 1yr yield was up 1.9ppts, DM Americas up 3ppts, DM Europe up 2.9ppts, DM Pacific up 0.8ppts
• 10yr yield in DM Europe and DM Americas widened fastest, little movement in DM Pacific
• World 10yr yield was up 0.9ppts, DM Americas up 1.2ppts, DM Europe up 1.8ppts, DM Pacific up 0.4ppts

Rate progression

• 3m yield has risen most aggressively in DM Americas
• DM Europe yield moved at a similar pace to World
• DM Pacific yield only rose slightly, widening the 3m interest rate differential to other DM regions
• Unlike World, 1yr yield has fallen in all DM regions in March 2023
• 10yr yield in DM Americas and DM Europe moved up simultaneously
• DM Pacific 10yr yield stayed almost flat
• All DM 10yr rates fell MoM in March

Yield curve

• DM Americas yield curve has inverted the most among all DM regions
• In March 2023, the 3m yield was 1.3ppts higher than the 10yr yield
• The degree of inversion is similar to World
• DM Europe yield curve just inverted in March 2023
• The yield curve turned to negative territory as the 10yr yield dropped in March by 0.4ppts compared to February
• Though the inversion is much less extreme compared to World
• DM Pacific sees flattening yield curve over the past 12 months, but remains positive
• As of March 2023, the long-term 10yr yield was 0.3ppts higher compared to the short-term 3m yield
• One year earlier, the difference was 0.9ppts

Key points

• ST rates in DM Americas and Europe risen more aggressively than World, DM Pacific much slower
• Small increases in LT rate in all DM regions YoY, but fell MoM
• DM Pacific maintains a positive yield curve while inversion worsened in DM Americas and Europe

Emerging Market Regions - Massive ST rate hikes in ME&A and Frontier, LT rates more stable, no yield curve inversion in Asia

Interest rate overview

• EM Americas 3m yield 12.7%, EM Asia 3.2%, EM Europe 14.6%, EM ME&A 52.7%, Frontier markets 23%
• EM Americas 1yr yield 12.6%, EM Asia 3.2%, EM Europe 9.4%, EM ME&A at 23% is half 3m rate, Frontier markets 17.1%
• EM Americas 10yr yield 11.2%, EM Asia 3.6%, EM Europe 8.8%, EM ME&A 10yr yield  at 15.4%, 1/3rd of 3m rate, Frontier markets 10yr yield 11.9%, half 1yr

Year-on-year changes

• 3m yield has risen in all EM regions; it was most extreme in ME&A and Frontier markets
• EM Americas 3m yield was up 3.1ppts, EM Asia up 0.9ppts, EM Europe up 0.3ppts, EM ME&A 3m yield was up 43.2ppts, Frontier 3m yield was up 10.6ppts
• 1yr yield saw a rise in all EM regions YoY, except in EM Europe
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