EM CEEMEA CREDIT: Development Bank of Kazakhstan (DBKAZ): Lagging the Sovereign
DBKAZ 30s at z+103bp (z+76–145bp YTD range). S&P's upgrade of DBKAZ following the sovereign was unsurprising; the more interesting development is the lack of corresponding spread compression across Kazakhstan's quasi-sovereign complex. The sharp rally in KAZAKS 30s opened a notable divergence.
- The move has been concentrated at the front of the sovereign curve; KAZAKS 30s have tightened to ~z+70bp and through June tights, while longer-dated sovereign bonds and quasi-sovereigns have failed to follow.
- The divergence is now large enough that either the sovereign front end has moved too far, or the quasi-sovereigns have not tightened enough. Given the improving credit backdrop, we see a reasonable case for at least some of the adjustment to come through the latter.
- DBKAZ looks relatively well placed given its stronger standalone profile and Baiterek ownership, while more leveraged quasi-sovereigns such as Temir Zholy will be a watchpoint.
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JAPAN: 4.9% Y/Y Implied Minimum Wage Hike; Close To Rengo
Reports yesterday suggested the minimum wage would be increased to the "high 1100s", so this JPY1,176/hr target is in the middle of that implied range.
It represents a 4.90% Y/Y increase from the current JPY1,121/hr level. A reminder that the average Rengo wage increase agreed during the spring negotiations was 5.01% Y/Y.
Nikkei article is here
JAPAN: "*JAPAN TARGETS MINIMUM WAGE OF 1,176 YEN/HOUR FOR FY26: NIKKEI" bbg
"*JAPAN TARGETS MINIMUM WAGE OF 1,176 YEN/HOUR FOR FY26: NIKKEI" bbg
US TSYS: Early SOFR/Treasury Option Roundup
SOFR & Treasury options trade outlined below: Mixed wing trade on net with SOFR seeing better put interest (albeit on lighter volume) while Treasury options see better Sep26 10Y call flow. Treasury yields tracking lower crude prices (WTI -1.61 at $81.0/bbl). Focus on Wednesday's FOMC policy annc (likely steady, Citadel calling for surprise hike - Bbg reported). Projected rate hike pricing eased slightly vs. late Monday highs (*): Jul'26 at +9bp (+9.5bp), Sep'26 at +26.7bp (+27.5bp), Oct'26 at 34bp (34.5bp), Dec'26 43.4bp (+42.2bp).
- SOFR Options:
- 2,000 SFRQ6 96.06/96.18 call spds vs. 95.87 puts
- 8,000 SFRQ6 95.87 puts, 3.0 ref 96.015
- 11,000 SFRU6/SFRZ6 95.81/95.93 put spd spd
- 4,000 SFRV6 95.37/95.50/95.62/95.75 put condors ref 95.88
- 3,000 SFRZ6 96.50 calls ref 95.88
- Treasury Options:
- 5,000 TYU6 107.75/109.75 strangles ref 108-21.5
- 2,100 FVU6 105.25/105.75 put spds ref 106-09
- 4,000 TUU6 103.25 calls ref 102-26.38
- 10,000 wk1 TY 109.25 calls, exp 8/7
- 30,000 TYU6 108.5/109.5 call spds, 28 ref 108-22.5
- 1,600 TYU6 109.5/110.5 call spds, 10 ref 108-23.5
- 2,100 TYU6 110 calls, 7 ref 108-22
