EM ASIA CREDIT: Adani Ports (ADSEZ, Baa3/BBB-/BBB-) $bonds diverging

Strong inflows continue with India topping US$4bn of inflows over the last nine days. 

• South Korea: Recorded inflows of +$576m as of yesterday, bringing the 5-day total to +$847m. 2025 to date flows are -$12,096m. The 5-day average is +$169m, the 20-day average is -$326m and the 100-day average of -$136m.
• Taiwan: Had inflows of +$310m as of yesterday, with total inflows of +$1,765m over the past 5 days. YTD flows are negative at -$18,312. The 5-day average is +$353m, the 20-day average of -$44m and the 100-day average of -$207m.
• India: Had inflows of +$295m as of the 28th, with total inflows of +$2,213m over the past 5 days.  YTD flows are negative -$12,562m.  The 5-day average is +$443m, the 20-day average of +$107m and the 100-day average of -$125m.
• Indonesia: Had inflows of +$1m as of yesterday, with total outflows of -$44m over the prior five days.  YTD flows are negative -$3,071m.  The 5-day average is -$9m, the 20-day average -$59m and the 100-day average -$38m
• Thailand: Recorded inflows of +$18m as of yesterday, outflows totaling -$218m over the past 5 days. YTD flows are negative at -$1,704m. The 5-day average is -$44m, the 20-day average of -$25m the 100-day average of -$35m.
• Malaysia: Recorded inflows of +$12m as of yesterday, totaling +$166m over the past 5 days. YTD flows are negative at -$2,734m. The 5-day average is +$33m, the 20-day average of -$25m and the 100-day average of -$35m.
• Philippines: Saw inflows of +$5m as of yesterday, with net inflows of +$7m over the past 5 days. YTD flows are negative at -$281m. The 5-day average is +$1m, the 20-day average of -$3m the 100-day average of -$4m.

Q1 headline and underlying inflation printed 0.1pp higher than expected but the trimmed mean at 2.9% y/y is below the top of the RBA’s 2-3% target band for the first time since Q4 2021. The data is close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.

Australia CPI inflation y/y%

• Q1 trimmed mean CPI rose 0.7% q/q to be up 2.9% y/y, down from the upwardly revised Q4 at 3.3% y/y.
• Domestically-driven services inflation moderated to 3.7% y/y in Q1 from 4.3% with core services at 3.3% y/y after 4.2% y/y, the lowest since Q1 2022, which should reassure the RBA. Also, the moderation was broad based, which is important for sustainability. However, non-tradeables inflation rose 0.1pp to 3.2% y/y.
• Tradeables continued to provide disinflationary pressure falling for the third straight quarter down 0.4% q/q bringing the annual rate to 0.9% from 1.1%. Good prices rose 1.0% q/q though to be up 1.3% y/y after 0.8% y/y. 

Australia goods vs services inflation y/y%

• Headline rose 0.9% q/q & 2.4% y/y, in line with Q4’s annual rate. It continues to be impacted by government electricity rebates and the ABS said that electricity prices rose 16.3% q/q in Q1 due to Brisbane households already using the $1000 subsidy. Also, the impact of the federal government’s relief was less in Q1 than Q4.
• Food and non-alcoholic beverages rose 1.2% q/q driven by fruit & vegetables because of less supply.
• Education rose 5.2% q/q as higher costs were passed on and tertiary fees indexation (+3.6%). 

ACGBs (YM -1.0 & XM +2.0) slightly mixed on the day but 2-4bps cheaper after Q1 CPI slightly beat expectations. 

• Q1 CPI and the March monthly print were above forecasts. The closely watched trimmed mean gauge of consumer prices, advanced 0.7% in the first quarter, from 0.5% three months earlier and compared with an expected 0.6% gain. On an annual basis, it rose 2.9% versus a forecast 2.8% increase.
• (ABS) "The main contributors to the quarterly CPI rise of 0.9 per cent were Housing (+1.7 per cent), Education (+5.2 per cent) and Food and non-alcoholic beverages (+1.2 per cent).”
• Cash US tsys are slightly mixed, with a flattening bias, in today’s Asia-Pac session after yesterday’s modest rally.
• Cash ACGBs are flat to 2bps richer on the day, with the AU-US 10-year yield differential at -1bp.
• Swap rates are flat to 4bps lower, with the curve flatter.
• The bills strip has bull-flattened, with pricing flat to +8.
• RBA-dated OIS pricing is 2-6bps firmer across meetings after the data. A 50bp rate cut in May as a 2% probability (10% before the data), with a cumulative 112bps (117bps before) of easing priced by year-end.