EM ASIA CREDIT: Baidu (BIDU): Fitch downgrade

The BBDXY range overnight was 1215.16-1221.85, Asia is currently trading around 1216,-0.10%. The USD collapsed back toward the 1216-1218  support area in reaction to the softer US CPI. A tough market as most traders would have been building a position looking for the USD to potentially extend higher considering the headwinds in the Middle-East. This move has taken the wind out the sails of the USD. I will be closely watching to see if this move is something more than just a knee-jerk reaction. The first support which is currently being challenged is 1215-1218 and through here the 1205-1210 area comes back into play. Having touched the initial target toward the 1225-1230 area, I thought we could see some sort of a pullback but I remain skewed toward fading a dip initially looking for a retest of the highs at some point.                             

• EndGame Macro on X: “June CPI is a false comfort. Iran can temporarily cover weakening domestic pricing power with another energy spike. By the time unemployment becomes weak enough to force the Fed to react, the deflationary process may already be entrenched.”  https://x.com/onechancefreedm/status/2077118060528365920?s=20
• “Warsh remarked Tuesday that a hawkish Fed with inflation credibility will actually reduce long-end bond yields by lowering inflation expectations.” - BBG
• The BBDXY Average True Range for the last 10 Trading days: 4.21 Points

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Bloomberg’s global container ship count showed a 10% decline between February and December and then it recovered over the subsequent three months with May 1.6% above December’s level. This suggests that non-energy merchandise trade hasn’t been adversely affected by the destabilisation and uncertainty in the Middle East and fears of the impact of higher fuel prices on global growth. CPB world trade growth has been robust over 2026 to April and that appears to have continued. 

Bloomberg global container ship count

• While trade tensions have eased compared with 2025, many disputes with the US persist. For instance, Thailand has just sent a delegation to discuss issues related to labour rights and China using it to cover the origin of its goods.
• Trade tensions between the US and Europe often flair with disputes over Greenland’s sovereignty one example where President Trump throws tariff threats into the arena.
• Container ship departures from Europe’s 6 largest traders have been trending lower since mid-2023 and the June 2026 30-day average at 73 is well below the 88 average from 2023 to end-January 2025. It appears to have stabilised over mid-year.
• Recent departures from Asia for the US have been impacted by Super Typhoon Bavi which severely impacted China, Taiwan and Japan. Departures from Taiwan on the weekend almost ground to a halt. It is likely that there will be payback when conditions allow.
• While departures from Taiwan for the US were steady prior to the typhoon, they were strong in June from China, Japan and Korea.

Bloomberg global container ship count

Source: MNI - Market News/Bloomberg Finance L.P.

The latest round of ACGB Apr-33 supply proceeded smoothly with pricing through mids (weighted average yield was 0.63bp through prevailing mids, per Yieldbroker).

• Moreover, the auction had a cover ratio of 4.2857x, which was lower than the level of the previous auction (3.1063x).
• As highlighted in the auction preview, the outright yield was 20bps below the level of the previous auction and ~30bps below its cycle high.
• However, the 3/10 yield curve had steepened versus the previous auction, continuing its move away from the recent low, the flattest since mid-2024.
• There has been a slight cheapening in cash trading of the line after the auction result.