Asia rates ex-Japan: Nomura turns tactically less bearish on Asia rates but remains positioned for higher Singapore yields

Overview

Nomura’s Asia rates strategy becomes tactically less bearish after the sharp rise in US yields, while maintaining a medium-term expectation of higher rates. The report favors paying Singapore rates and restructures a Korea-versus-Taiwan receiver into a tightly risk-managed outright Korea receive position.

Core views

Nomura maintains a medium-term bearish view on rates, arguing that high energy prices, still-solid US growth, strong US equities and fiscal concerns could continue to push yields higher. Within Asia, it identifies Singapore as its preferred market for paying rates because nominal and real yields are low, liquidity may tighten and credit growth could accelerate. It retains a pay December 5-year SORA trade at conviction 4/5. Supporting the view, the latest 15-year Singapore Government Securities auction produced a 1.6x bid-to-cover ratio, below the 1.8x-1.9x range seen at long-dated SGS auctions earlier in the year. Outside Singapore, Nomura’s stance is more mixed. US 10-year yields have climbed 50bp over the past month and are nearing their previous 2007 high, leading the institution to see potential for near-term consolidation. It therefore converts its receive H27-5y Korea NDiRS versus Taiwan position into an outright Korea receiver by removing the Taiwan leg. The remaining Korea position is at 2.56%, with a tight stop at 4.40% against a current level of 4.335%. The prior relative-value position is approximately 7bp out of the money, with an average entry of 171bp versus 178bp currently. Nomura sees value in dropping the Taiwan leg following its post-holiday rebound: the CBC was more dovish than expected at its September monetary-policy meeting, while the two-year CBC NCD auction yield issued after that meeting was about 3bp lower than in August. Limited green-bond issuance in the third quarter may also reduce long-end Taiwan swap pay flows, particularly as the Taiwan swap curve is already historically steep. Korean rate performance has been weaker than Nomura previously expected, despite two Bank of Korea hikes and declines in both the KOSPI and USD/KRW from recent highs. The institution nevertheless retains the Korea receiver for now under a tight stop-loss discipline and plans to reassess it after Friday’s September CPI release.

Analysis framework

The report combines a medium-term macro view on rate drivers with tactical analysis of US yield momentum, central-bank signals, bond-auction demand, issuance-related swap flows and relative pricing in Korea and Taiwan. It expresses the conclusions through directional and relative-value swap trades with explicit stop-loss levels.

Methodology notes

• Industry AnalysisSupply-demand framework

  Auction demand and issuance-related swap-flow analysis

  Nomura uses weak SGS auction demand and limited Taiwan green-bond issuance to assess how bond supply and associated swap flows may affect long-end rates.

• Other

  Tactical directional and relative-value rates positioning with stop-loss management

  The report translates its market view into a Singapore pay trade and a Korea receiver, while removing the Taiwan leg and defining a stop level for the remaining Korea exposure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• December 5-year SORA

  Pay-rate position favored by Nomura

  Strengths

  Low nominal and real yields, potential liquidity tightening and a pickup in credit growth.

  Comparison

  Singapore is described as Nomura’s preferred Asia market for paying rates.

  Risks

  The report’s medium-term higher-rate drivers may not materialize.

• H27-5y Korea NDiRS

  Outright receive-rate position after removal of the Taiwan leg

  Strengths

  Potential near-term consolidation after the sharp US yield increase supports a tactical receiver.

  Weaknesses

  Korean rate price action has remained poor despite two BOK hikes.

  Comparison

  Previously expressed against Taiwan; Nomura removes Taiwan exposure after its rebound.

  Risks

  The position has a 4.40% stop-loss level and will be reassessed after Korea’s September CPI release.

• Taiwan swaps

  Removed from the prior Korea-versus-Taiwan relative-value trade

  Strengths

  Dovish CBC signals and lower two-year NCD auction yields support Taiwan rates.

  Comparison

  Limited third-quarter green-bond issuance could reduce long-end pay flows while the curve is historically steep.

Key data

• US 10-year yield move+50bp over the past monthYields are approaching their previous 2007 high.
• 15-year SGS auction bid-to-cover1.6xBelow the 1.8x-1.9x range at long-dated SGS auctions earlier in 2026.
• Korea H27-5y NDiRS current level2.56%The relative-value Korea-versus-Taiwan receiver is converted into an outright Korea receiver.
• Korea H27-5y stop level4.40%Set against a current level of 4.335%.
• Korea-versus-Taiwan trade performance~7bp out of the moneyAverage entry was 171bp versus 178bp currently.
• Two-year CBC NCD auction yield change~3bp lower than AugustThe auction was issued after the September CBC meeting.

Impact & implications

Nomura’s tactical adjustment reduces exposure to Taiwan rates following dovish CBC signals and potentially lighter long-end swap pay flows, while preserving a conditional Korea receive view. Its strategic preference remains to pay Singapore rates, where it sees greater upside pressure on yields.

Risks

• High energy prices, solid US growth, strong US equities and fiscal concerns could drive rates higher.
• Korean rate performance has remained weak relative to Nomura’s earlier expectations.
• The Korea receiver will be closed if its 4.40% stop-loss level is reached.

What to watch

• Korea’s September CPI release on Friday, which Nomura flags as a reassessment point for the Korea receiver.
• Further US yield consolidation or renewed upward momentum after the recent 50bp increase in US 10-year yields.
• Singapore liquidity conditions, credit growth and future SGS auction demand.
• Taiwan central-bank policy signals, NCD auction yields and green-bond issuance.