Markets Overview

  • ASX SPI 200 futures up 0.4% to 7,330.00
  • Dow Average down 0.6% to 35,911.81
  • Aussie down 1.0% to 0.7213 per US$
  • U.S. 10-year yield rose 8.1bps to 1.7841%
  • Australia 3-year bond yield rose 4bps to 1.21%
  • Australia 10-year bond yield fell 0.9bps to 1.85%
  • Gold spot down 0.3% to $1,817.94
  • Brent futures up 1.9% to $86.06/bbl

Economic Events

Emerging-market central banks were the first in the world to raise interest rates from their pandemic lows last year. That proactive tightening is starting to pay off big time in boosting returns from their local bonds.

An index of debt issued by developing nations denominated in their own currencies has returned about 1% over the past three months, while a similar gauge of hard currency bonds has tumbled 2.9%, according to data compiled by Bloomberg.

The outperformance has come amid optimism the proactive central-bank policy was enough to get ahead of inflation, and should mean that further tightening is now less necessary into 2022. Improving economic conditions as the global recovery gets underway are also attracting investors to local debt.

Policy makers across emerging markets have gone on a tightening spree over the past 12 months to help contain inflation, most notably in Latin America. No fewer than 12 of the 20 biggest developing-nation central banks raised interest rates in 2021, tightening by a combined 2,300 basis points, according to a Bloomberg Intelligence analysis.

That beefed up rate premiums across the developing world and bolstered the appeal of emerging-market assets. In Brazil, for instance, the central bank has boosted its Selic rate by 725 basis points to 9.25%, while Chilean policy makers have increased their benchmark by 350 basis points to 4%. The Fed, meanwhile, has kept its target rate at a record-low 0.25% since March 2020.

The rally in emerging-market local bonds has nevertheless been somewhat uneven, with relative performance driven by individual country dynamics. The biggest gainer among the 19 nations in the Bloomberg EM Local Currency Government Bond Index has been Chile with a return of 4.6% over the past three months, followed by Israel with 3.2% and China with 3%.

While local-currency bonds has largely prospered, their dollar-denominated cousins have been put under pressure by looming Fed tightening. The U.S. central bank has sounded increasingly hawkish in recent weeks with markets now pricing for a first rate hike as soon as March. Quickening inflation in the world’s biggest economy is also sapping demand for dollar debt. The U.S. consumer-price index jumped to 7% in December, the highest level in almost four decades.

Other News

The ‘Baby Shark Dance’ music video has become the first YouTube video to reach 10 billion views on the platform.

The record was reached on Thursday, with 10,002,858,093 views at time of writing.

Baby Shark Dance had already set a Guinness World Record as the most viewed video on YouTube in November 2020, when it had received seven billion views. It ranked number 32 on Billboard’s Hot 100 and number 6 in the British Official Charts in 2019.

The previous record-holder was Luis Fonsi and Daddy Yankee’s “Despacito”, but Baby Shark Dance surpassed it by over two billion views. It has been the most-viewed video on YouTube for the past 15 months.

The video is produced by Pinkfong, a children’s education brand from South Korean company SmartStudy. They have developed over 4,000 children’s videos, songs, games, and apps to date.

It was first released in November 2015 and went viral across south east Asia. The dance has since spawned an animated TV series on Nickelodeon, live tours, and NFTs.
Its popularity grew through the ‘baby shark challenge’, which encouraged people to film themselves performing the moves of the dance.

In 2018, there were 88,000 Instagram posts tagged with the hashtag #babysharkchallenge.