SECURITIES DIVISION

APAC FX & Rates Daily Update

Friday, April 04, 2014 RATES MARKET LEVELS
AUD
2y 5y 10y 1y1y fwd 5y5y fwd 2/5s

-1w
2 2 5 1 13 1

Level
2.96% 3.73% 4.45% 3.20% 5.39% 77.3

-1d
1 -1 -2 0 1 -2

-1m
13 14 10 13 3 1

Carry NZD
11 12 8 12 5 1 11 16 10 16 4 5 8 8 5 9 -0 3 3 3 -0 11 16 15 5 2 4 6 -1 2y 5y 10y 1y1y fwd 5y5y fwd 2/5s 2y 5y 10y 1y1y fwd 5y5y fwd 2/5s 2y 5y 10y 1y1y fwd 2/5s 2y 5y 1y1y fwd 2/5s 2y 5y 1y1y fwd 2/5s AUD JPY SGD CNH

Level
4.09% 4.68% 5.08% 4.55% 5.60% 59.0

-1d
-0 -0 -1 -2 -1 0

-1w
6 7 7 7 7 1

-1m
27 24 15 30 -5 -3

Carry
21 13 8 23 2 -7

SGD
2y 5y 10y 1y1y fwd 5y5y fwd 2/5s

Level
0.66% 1.84% 2.79% 0.98% 3.89% 118.3

-1d
1 2 1 0 -1 2

-1w
0 8 9 2 9 8

-1m
15 26 12 25 -5 11

Carry KRW

Level
2.81% 3.10% 3.35% 2.93% 3.62% 28.3

-1d
0 0 0 -0 -1 -0

-1w
2 5 5 3 6 2

-1m
2 1 1 4 -0 -1

Carry
5 4 2 6 1 -1

MYR
2y 5y 10y 1y1y fwd 2/5s

Level
3.68% 4.16% 4.68% 3.87% 48.0

-1d
1 2 2 2 1

-1w
4 5 7 5 2

-1m
11 16 16 16 6

Carry THB

Level
2.29% 3.11% 3.78% 2.54% 82.0

-1d
-1 -2 -2 -1 -1

-1w
4 4 4 5 0

-1m
4 15 20 10 11

Carry
9 11 7 13 2

CNY/H
2y 5y 1y1y fwd 2/5s

Level
4.39% 4.64% 4.44% 25.0

-1d
-5 -4 -6 1

-1w
12 15 12 3

-1m
-10 -4 -15 6

Carry INR

Level
8.43% 8.65% 8.58% 22.0

-1d
-2 -1 -2 1

-1w
12 14 18 2

-1m
0 5 8 5

Carry
-4 1 -1 5

HKD
2y 5y 1y1y fwd 2/5s

Level
0.75% 1.98% 1.06% 122.8

-1d
-1 0 -2 1

-1w
1 7 3 6

-1m
12 30 22 18

Carry TWD

Level
1.02% 1.38% 1.11% 36.7

-1d
-0 -0 -1 0

-1w
-1 3 -1 4

-1m
5 4 3 -1

Carry
4 5 5 1

JPY
5y 10y 5y5y fwd 10/20s

Level
0.34% 0.83% 1.32% 76.5

-1d
0 0 -0 -1.1

-1w
2 1 0 -0.8

-1m
3 4 3 0.4

Carry Xccy

Tenor
5y 5y 2y 2y

Level
0.25% -0.46% -0.05% 1.21%

-1d
1 0 0 -0

-1w
0 -1 0 5

-1m
-2 -2 1 0

*Carry is defined from the received perspective over a 3 month horizon **Arrows indicate positioning (up arrow = paid, down arrow = received, side arrow = flat)

TOP TRADES & COMMENTS

TOP FXO TOP IR AUD IR 1. Long USDCNH straddle [Entry: 2.525 | Target: 3.5 | Loss limited to premium spent] 2. 2/5s CNY repo steepener [Entry: 15bp | Target: 50bp | Stop: -5bp] Xccy basis getting the most attention today as front end led the way higher, 3m closing 2.25bp higher on the day. Many questions are being asked not only from the fast money community but also from the domestic community which says ones thing. There hasnt been one reason why this move has happened, rather its a mixture of a bit of everything. In a very general sense however it seems that positioning from weak carry positions would be the main culprit while domestic paying in the short end would have been the match that lit the fuse. We have already seen the AU spot bill/ois widen out a few bp in late March as some of the domestic issues more bank bills than normal to cover some short term cash flow needs. Not a whole lot new to add on a quiet Friday where rates were 0.25bp lower and the curve 0.25bp flatter. We hold our 3m6m vs 2y steepener as we are still seeing domestic paying coming in 2y+ and expect this mortgage related flow to increase after the next RBNZ hike this month. In other trades we continue to hold our positions in long NZDAUD cross vs received NZ rates vs AU spread and look for a good location to add. Even if the relationship doesnt move or gets slightly worse, the 25bp carry per 3m will provide a great buffer. It Market has come to a standstill with the most substantial flow we've seen being further receivers of 5y5y likely against US/EUR/KRW and some small unwinds of 10y swap spreads. Post NFP there will be the MAS meeting to look forward to in April where we expect an unchanged stance from the authority. SPK auction today was the focus of onshore market as the smaller than expected 7.5year bond came at an average yield of 4.345% (W of 4.35/30), at a +30bp spread over MGS. In general the tone for MGS has been better buying from 3y-7y bonds indicating decent interest to at least short cover ahead of NFP. In NDIRS, as yields gravitate higher we think there is still potential for the front-end to be bid higher though we've seen interest to start fading this move via 6m fwd 2/3/5s receiving. Spot is trading in a very tight range today. Trade balance for February came out better than expectation, reversing the drop in January. All eyes on NFP tonight for further cues Another uneventful morning with no IDR ndf traded whole morning. Level unchanged from Ny closing of 11355-65. USDPHP had another short squeeze last night to a high of 45.17 in 1mNDF but this morning relatively stable with a range of 45.05-10 due a lower inflation for the month of March, higher by 3.9% YoY while market expected 4.1%. USDTHB with some scatter buying interest, traded between 32.49-55 Bond yields higher by 2bp in the opening session as market prepares to absorb the first auction supply of the new financial year. Today we have INR160bn of auction, wherein cutoffs are expected to tail by 3-5bp from prevailing market levels as most securities on auction are relatively illiquid and have traded very thin volumes in the last couple of days. 10y benchmark bond trading 2bp weaker at 9.035. Not much activity on swaps, with the 1x5 steepening by 0.5bp today. Overnight rates in the 8.25/8.50 range and are expected to revert Strong demand from a large corporate and a custodian bank kept spot well supported. Leverage accounts continued to cover their short USD position also added a firm tone to the pair. Korea rates market opened barely changed from previous closing ahead of the big NFP data coming out tonight and is trading amidst a very silent session in a 1 bp range. Continuing from position reduction from foreigners in 3y KTB Fut space, foreigners have sold 5.5k cts so far. Back tenors in cash bonds from 10y to 20y are stronger by 1 to 1.5 bps with front end weaker, leading curve to flatten. After reaching 2000, KOSPI is showing lackluster price action. USDKRW made new lows again to 1053.4, trading as an outlier to other USD/Asia which has been stable or actually higher today. Main selling continues to come from local corporates and offshore while market position seems to be long USD as well in this pair waiting for dividend outflow this month. We have been keeping flat position from yesterday and would reassess after NFP tonight. CNY fixing was set higher at 6.1557, +37 from last 6.1520, in sync with DXY index. Spot CNH and CNO were quite happy to see the neutral fixing. Both came off after the fixing about 40 pips, CNH 6.2195->6.2155 and CNO 6.2175->6.2135. But local HK banks were firmly buying this dip to keep CNH at +20 premium to CNO. The arbitrage activities kept on draining the CNH liquidity away from HK mkt, thus T/N trading to +2.3-2.5 per day, and the whole CNH fwd curve moved up 10-30 pips, 1m +55->65, 3m +160->175, 1y +495->520. The onshore spot also got dragged up slowly by the arb to 6.2160-70, and spot CNH back up to the high 6.2195 before Ldn open. A very quiet day before US payroll tonight. Client flow was light as well as trading volume on the street was below average. The rates curve moved slightly higher with 10s20s flattening by 0.5bp. $/Y basis widened by 1-1.5bp in yesterday LDN time but came back in TKO session today without much trading volume. The liquidity looks very thin and only saw wider price in the market. Backend vol in CNH has a proper pop with spot trading 100pips higher from yesterday open, 1y mid close to 3 handle again compared to 2.725 print two days ago, 2yr 3.7 mid vs 3.45 low this week. HF community keeps paying on the way up, while dealers still are core long vega but supply from structured deals dries up. We expect spot vol correlation to perform on a move higher in spot, due to short derive from EKI TARN structures. RR is catching up the move, 1yr closed at 1.65 and opening up here at 1.75/1.85. Elsewhere in USDKRW, as

NZD IR SGD IR MYR IR MYR FX IDR/ PHP/ THB FX INR IR INR FX KRW IR KRW FX CNY/H FX

JPY IR FXO (APEJ)

FX MARKET LEVELS
NDF KRW CNY TWD INR MYR PHP IDR DF KRW SGD HKD THB CNH CNO 1m 1055.9 6.183 30.240 60.76 3.2870 45.07 11365 Spot 1053.5 1.2639 7.7577 32.540 6.2212 6.2173 -1d -3.650 0.007 -0.021 0.20 -0.002 0.010 15 -1d -4.400 0.001 0.000 0.04 0.012 0.009 -1w -15.100 0.009 -0.224 0.28 0.006 0.015 -55 -1w -15.800 0.002 0.000 0.02 0.014 0.005 1m*12m 15.050 0.060 -0.300 4.120 0.061 0.425 700 1y points 14.700 -0.075 -0.004 0.59 0.054 0.019 -1d -0.200 0.006 0.000 0.085 0.000 0.010 10 -1d -2.200 -0.002 0.000 0.00 0.006 -0.022 -1w 0.250 0.009 -0.025 0.100 0.000 0.000 15 -1w -1.800 -0.002 0.000 -0.01 0.008 -0.003 GS pos 1 0 0 1 -2 0 2 GS pos 0 2 -1 1 0 0 Mkt 1 -1 1 -1 -1 -1 -2 Mkt 0 0 0 1 -1 -1

FX OPTIONS MARKET LEVELS

VOLS KRW SGD CNY CNH TWD INR MYR PHP IDR CAL KRW SGD CNY CNH TWD INR MYR PHP IDR 1m 6.40% 4.35% 2.05% 2.65% 3.50% 8.90% 6.50% 5.75% 10.50% 1m/1y 2.60% 0.45% 0.40% 0.35% 0.60% 2.70% 1.50% 1.00% 1.00% -1d 6.40% 4.25% 2.00% 2.55% 3.50% 8.70% 6.70% 5.75% 10.50% -1d 2.60% 0.55% 0.40% 0.30% 0.60% 2.90% 1.30% 1.00% 1.00% -1w 1y 6.80% 9.00% 4.15% 4.80% 2.20% 2.45% 2.75% 3.00% 3.50% 4.10% 8.80% 11.60% 6.50% 8.00% 5.75% 6.75% 10.50% 11.50% -1w 25d RR 2.65% 3.80% 0.85% 2.00% 0.30% 1.65% 0.10% 1.85% 0.95% 1.40% 3.20% 3.50% 1.50% 1.00% 1.00% 2.75% 2.25% 4.50% -1d 9.00% 4.80% 2.40% 2.85% 4.10% 11.60% 8.00% 6.75% 11.50% C/P KRW P SGD P CNY P CNH P TWD P INR P MYR P PHP P IDR P -1w 9.45% 5.00% 2.50% 2.85% 4.45% 12.00% 8.00% 6.75% 11.50% 25d BF 0.65% 0.45% 0.63% 0.72% 0.35% 0.78% 0.55% 0.55% 1.10% Realized 8.44% 3.59% 0.77% 1.04% 2.47% 8.03% 5.34% 3.44% 8.03% Richness -2.04% 0.76% 1.28% 1.61% 1.03% 0.87% 1.16% 2.31% 2.47%

KEY EVENTS CALENDAR

AUD 31-Mar 31-Mar 1-Apr 2-Apr 3-Apr 3-Apr NZD 31-Mar 31-Mar SGD 2-Apr MYR 4-Apr 4-Apr 4-Apr THB 31-Mar 31-Mar 31-Mar 1-Apr CNY 1-Apr 1-Apr 3-Apr 3-Apr INR 1-Apr 1-Apr 1-Apr KRW 31-Mar 1-Apr 1-Apr 1-Apr Exp./Pr. 0.20% 0.50% 2.50% 27.90% 0.30% 800M Exp./Pr. 2.00% 70.8 Exp./Pr. 51.1 Exp./Pr. 10.20% 15.00% 7.80B Exp./Pr. -1.50% -12.90% $2680M 2.10% Exp./Pr. 48.1 50.1 55 51 Exp./Pr. 4.00% 7.00% 8.00% Exp./Pr. $3606M 1.40% 3.90% 3.50% Act. 0.20% 4.60% 2.50% 23.20% 0.20% 1200M Act. -1.70% 67.3 Act. 50.8 Act. 12.30% 9.50% 10.44B Act. 2.20% -18.90% $5065M 2.11% Act. 48 50.3 54.5 51.9 Act. 4.00% 7.00% 8.00% Act. $4525M 1.30% 5.20% 3.60% Data TD Securities Inflation MoM HIA New Home Sales MoM RBA Cash Rate Target Building Approvals YoY Retail Sales Trade Balance Data Building Permits MoM ANZ Business Confidence Data Purchasing Managers Index Data Exports YoY Imports YoY Trade Balance Data Exports YoY Imports YoY BoP Current Account Balance CPI YoY Data HSBC China Manufacturing PMI Manufacturing PMI Non-manufacturing PMI HSBC China Services PMI Data RBI Cash Reserve Ratio RBI Reverse Repo Rate RBI Repurchase Rate Data BoP Current Account Balance CPI YoY Exports YoY Imports YoY