EM ASIA CREDIT: China Modern Dairy (CNMDHL, NR/BBB/NR) partial $ bond buyback.

The Australian Office of Financial Management (AOFM) will today sell A$1000mn of the 2.75% 21 November 2028, # TB152. The line was last sold on 22 November 2024 for A$700mn. The sale drew an average yield of 4.1189%, at a high yield of 4.120% and was covered 4.1214x. There were 33 bidders, 7 of which were successful and 2 were allocated in full.

• The previous round of Nov-28 supply saw the weighted average yield print 1.53bps through prevailing mids (per Yieldbroker), extending the recent trend of firm pricing at ACGB auctions. However, the cover ratio nudged lower to 4.1214x from 4.5214x. A higher outright yield and a 3/5 yield curve at its steepest since November 2023 appeared to work to support the bid.
• This week's ACGB supply will be larger than the recent average weekly issuance of $1500mn, with A$400mn of the 4.25% 21 June 2034 bond issued on Tuesday and A$600mn of the 2.75% 21 June 2035 bond to be issued on Friday.
• According to the Budget 2025-26 Issuance Program Update from the Australian Office of Financial Management (AOFM), total issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds by tender is expected to be between $2 billion and $3 billion (additional issuance by syndication may be considered).
• For 2024-25, issuance of Treasury Bonds has been revised to around $100 billion, including around $2 billion of Green Treasury Bonds. Treasury-Indexed Bond issuance will be around $3 billion.
• Results are due at 0200 BST / 1100 AEST.

Oil prices fell sharply on Tuesday and have continued selling off during early APAC trading. Risk appetite reversed when it became clear that not only will US reciprocal tariffs take effect from 0001 ET Wednesday but 104% was confirmed on China. A 34% reciprocal tariff was added to the original 20% and then another 50% as retaliation for China’s response. China said today that it prefers to negotiate but will “fight to the end” signalling no compromise at this stage.

• China is the world’s largest oil importer and a trade war is expected to weigh on global energy demand. China is also likely to continue switching any crude imports from the US to other suppliers. 
• WTI fell 4.1% on Tuesday to $58.23/bbl, close to the intraday low of $57.88. It reached a high of $61.75 in the Asian session. In early APAC trading it is down another 3.4% to $57.58 after reaching $57.22. Support at $58.95 and $57.79 have been broken opening up $56.81. Round number support is at $55.00.
• Brent sank 4.0% yesterday to $61.62/bbl after a low of $61.34. It breached support at $62.51 and $61.97 opening up psychological round number support at $60.00.
• Bloomberg reported that there was a US crude inventory drawdown of 1.1mn barrels last week but they rose 600k at Cushing, according to people familiar with the API data. Gasoline rose 200k while distillate fell 1.8mn. The official EIA data is out later today.
• The sell off in oil has been exacerbated by OPEC’s decision to increase output at a greater-than-expected rate but many producers will face budget pressures with prices around these levels. 

ACGBs (YM +8.0 & XM -8.0) have twist-steepened in line with developments abroad. 

• Overnight, US tsys finished mostly weaker as tariff headlines continued to rattle markets, with curves twisting to the steepest levels in over three years.
• The US long end was hit hard with the 30-year cheapening by 15bps. The 10-year was 11bps higher at 4.29%, while the 2-year yield richened 4bps to 3.73% on haven demand and rate cut bets.
• Trump officials confirmed 104% added tariff on China went into effect at noon, with WH press sec Leavitt adding that additional tariffs are to be collected starting tomorrow.
• Cash ACGBs are 8bps lower to 8bps higher with the 3/10 curve steeper and the AU-US 10-year yield differential at -3bps.
• The bills strip has bull-flattened, with pricing +7 to +14.
• RBA-dated OIS pricing is 1-14bps softer across meetings today. A 25bp rate cut in May is given a 70% probability, with a cumulative 128 bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will see Consumer Inflation Expectation data and a speech by RBA Governor Bullock.
• The AOFM plans to sell A$1000mn of the 2.75% 21 November 2028 bond tomorrow.