EM CEEMEA CREDIT: CEEMEA EM Credit Market Wrap

Although the intraday bid in gilts has extended further, with equities and oil edging lower in recent trade, we note that the uptrend in 10-Year gilt yields drawn of the Dec ’21 lows remains intact (4.417% today). The benchmark last trades ~6bp lower at 4.457%.

• Meanwhile, futures hold comfortably below next resistance at the May 2 high (93.93), peaking at 93.42 today.
• Cross-market cues and correlations continue to outweigh domestic fundamentals at this stage.
• Although local factors are set to continue to provide sporadic influence when the UK’s delicate fiscal situation comes under scrutiny.
• A reminder that official bodies, namely the DMO and BoE, have become more activist when it comes to skewing supply away from the long end of the curve in recent weeks, which has provided some background support for long end UK paper, allowing major curves to pull back from cycle highs.

Fig. 1: UK 10-Year Gilt Yield (%)

Source: MNI - Market News/Bloomberg

In the wake of the landslide victory for PM Anthony Albanese and his centre-left Australian Labor Party (ALP) in the 3 May federal election, Guardian Australia reports that internal battles are emerging within various factions of the party ahead of the swearing in of a new ministry as Albanese gets his second term underway. The article claims there is speculation that Minister for Industry and Science Ed Husic, hailing from the New South Wales right faction of the ALP, could be demoted to make way for a figure from the Victorian right faction amid the increased parliamentary intake for the ALP. 

• Guardian Australia: "MPs from Victoria and other states believe the NSW right faction is overrepresented, with six places in the ministry. The left is expected to add an extra position, due to its growing presence in the party’s caucus.[...] Labor’s rules dictate that the factions choose members for 20 cabinet positions, with the leader assigning portfolios. Another 10 outer ministry roles and other appointments are also chosen by the leader."
• A caucus meeting of ALP lawmakers is scheduled for Friday, 9 May, while Albanese has confirmed that his new ministry will be sworn in on Tuesday, 13 May.
• The factional battles are unlikely to cause any significant issues for stability within the gov't in the short term, with the resounding win for the ALP meaning Albanese is at the peak of his political powers. Nevertheless, shifts in ministry representation between various state's lawmakers could foster resentment that could lead to personnel problems in the future. 

US Treasury Secretary Scott Bessent has stated in testimony to the House Financial Services Committee that some trade negotiations are in “advanced stages” but refused to be drawn on a timeline for announcing deals, despite telling CNBC that deals could be announced as soon as this week. 

• Bessent said revealing details of specific trade deals, including previewing announcements, would be “detrimental to the United States,” as negotiations may “still be in progress.”
• Bessent added, when pressed: “I’m happy to say there are negotiations going on [but] I’m not going to reveal the details.”
• Bessent reiterates that there are “18 important trading partners and we are moving forward at all deliberate speed with them.”
• When asked if he considered the negotiations “advanced”, Bessent said “some of them are quite advanced.”
• Bessent said that, rather than full negotiated trade deals, he expects upcoming announcements to be “agreements in principle,” which will be “papered over in the coming months.” Bessent noted that once an “agreement” is reached, he expects the other countries to “live up to it.”
• Bessent responded to a question asking if negotiations with China are advanced: “On Saturday we will begin, which I believe is the opposite of advanced.”
• Bessent also confirmed that President Donald Trump will have the "final decision" on any trade agreement.