EM ASIA CREDIT: Adani Ports: $ spreads softer

At the Tokyo lunch break, JGB futures are slightly stronger, +3 compared to the settlement levels, after paring overnight gains.

• This comes despite cash US tsys being 2-3bps richer in today’s Asia-Pac session, partially reversing yesterday’s cheapening.
• We are getting closer to the BoJ policy announcement release window. As usual, the general rule of thumb is that the later the policy announcement time, the greater the likelihood that a potential policy change is being debated.
• The BoJ is expected to keep its policy rate unchanged at 0.50% today. The key area of interest will be Governor Kazuo Ueda's post-meeting press conference. Investors will closely examine his comments for any signals on the timing and likelihood of future rate hikes.
• The second area of market focus is on the BoJ's JGB purchase program. Market expectations suggest a slower pace of reductions during fiscal year 2026. (See MNI BoJ Preview here)
• Cash JGBs are flat to 2bps cheaper across benchmarks, with the 7-10-year zone underperforming. The benchmark 10-year yield is 1.5bps higher at 1.453% versus the cycle high of 1.596%.
• Swap rates are flat to 2bps higher, with a mild steepening bias. Swap spreads are mixed.

We are getting closer to the BoJ policy announcement release window. The table below presents the policy announcement times going back to the start of 2024. It is currently near 10:55am local time in Japan. As usual, the general rule of thumb is the later the policy announcement time the greater the likelihood a potential policy change is being debated. 

• As we noted in our preview, no changes are expected in the policy rate. The key area of interest will be Governor Kazuo Ueda’s post-meeting press conference. Investors will closely examine his comments for any signals on the timing and likelihood of future rate hikes.
• The second area of market focus is on the BoJ’s Japanese Government Bond (JGB) purchase program. Market expectations suggest a slower pace of reductions during fiscal year 2026. If the BoJ chooses to maintain the current pace of ¥400 billion reductions per quarter in FY2026, this would be interpreted as a mildly hawkish move. See our full preview at this link. 

Fig 1: BoJ Policy Announcement Times 

Source: Bloomberg Finance L.P./MNI 

Authorities will introduce additional fiscal policies in H2 including further support for the consumer goods trade-in scheme, Shanghai Securities News reported, citing expectations from Wang Qing, analyst at Golden Credit Rating, who added the PBOC had room for further interest rate cuts. Retail sales grew by 6.4% y/y in May, the highest since 2024, boosted by the trade-in scheme and early launch of the 618 online shopping festival, analysts said. The government needs to further improve consumers’ spending capacity and willingness, as well as the supply of high-quality goods, the analysts added.