ISMS 16: Top 5 EM Country Interest Rates – Normal China Yield Curve

Emerging Countries - China and Russia with stable rates, LT rates up only slightly, yield curve inversion less severe except Russia

Interest rate overview

• China 3m yield 2.5%, India 7.2%, Korea 3.3%, Russia 22.3%, Brazil 13.6%
• China 1yr yield 2.2%, India 7.2%, Korea 3.3%, Russia 10.0%, Brazil 13%
• China 10yr yield 2.9%, India 7.3%, Korea 3.3%, Russia 10.3%, Brazil 13.1%

Year-on-year changes

• 3m yield went up in most emerging countries
• China 3m yield was up 0.1ppts, India up 3.4ppts, Korea up 2.1ppts, Russia flat, Brazil up 1.9ppts
• 1yr yield increases most prominent in India and Korea
• China 1yr yield was up 0.1ppts, India up 2.9ppts, Korea up 1.6ppts, Russia down 4ppts, Brazil up 0.2ppts
• 10yr yield curve hasn’t changed significantly among emerging countries
• China 10yr yield was flat, India up 0.5ppts, Korea up 0.4ppts, Russia down 0.8ppts, Brazil up 1.5ppts

Rate progression

• 3m yield was quite stable in developing countries
• Overall, developing countries have been more cautious in adjusted their short-term interest rates
• 1yr yield was volatile in Russia over the past year; other developing countries remained flat
• 10yr yield almost stayed constant in all emerging countries

Yield curve

• China yield curve remained constant over the past 12 months
• Both short-term and long-term yield haven’t moved much
• As of March 2023, the 10yr yield remained 0.4ppts higher than the 3m yield
• India yield curve flattened massively and looks set to invert
• 3m yield almost reached the same level as 10yr yield recently
• This is a massive change YoY as the yield curve was pretty steep back in March 2022
• Korea yield curve inverted slightly in March 2023
• Russia yield curve stays inverted
• Both short term yield and long-term yield haven’t moved much
• Brazil yield curve inversion has widened
• The inversion accumulated to 0.5 ppts which is a bit higher compared to the previous year

Key points

• India, Korea, and Brazil raised ST rates significantly; China and Russia were stable
• LT rates are up slightly in all EM countries but increased less than World
• Brazil and Korea saw yield curve inversion recently, Russia remains worst

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