EM ASIA CREDIT: Greentown China: Monthly sales rebound

The Australian Office of Financial Management (AOFM) will today sell. The line was last sold on 26 February 2025 for A$800mn. 

• The previous April 2037 auction saw solid demand, with the weighted average yield coming in 0.54bps through prevailing mid-yields, according to Yieldbroker, continuing the trend of firm pricing at recent ACGB auctions. Moreover, the cover ratio rose significantly to 3.6688x, up from 3.2188x at the prior auction, indicating stronger investor participation.
• Bidding at today’s auction is likely to be shaped by several key factors. The outright yield is roughly 5bps lower than at the previous auction and remains about 40bps below the November 2024 peak.
• The 3/10 yield curve is around 40bps steeper than the previous auction but sits around 20bps below its recent high.
• Investor sentiment toward longer-dated global bonds has weakened over the past week, driven by consistently stronger-than-expected US economic data, which continues to push back expectations for rate cuts.
• Notably, this bond is included in the XM futures basket, which may lend additional support to demand.
• Overall, firm pricing is still anticipated at today’s auction, given the higher yields and other favourable factors.
• Results are due at 0200 BST / 1100 AEST.

The Australian Office of Financial Management (AOFM) will today sell A$1000mn of the 3.75% 21 April 2037 bond. The line was last sold on 26 February 2025 for A$800mn. The sale drew an average yield of 4.4666%, at a high yield of 4.4675% and was covered 3.6688x. There were 41 bidders, 12 of which were successful and 4 were allocated in full.

• This week's ACGB supply is larger than the recent average weekly issuance of $1500mn, with A$300mn of the 4.75% 21 June 2054 bond sold yesterday and A$700mn of the 2.75% 21 November 2029 bond due 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.

The ESM5 had an overnight range of 5605 - 5671.75, Asia is currently trading 5665. The market traded heavily for most of the overnight session, but the Asian session has started positively as news that US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with China's "lead representative on economic matters" later this week in Switzerland, according to statements released Tuesday.(MNI Policy team)

• From the China side: "*CHINA DECIDES TO TALK TO US AFTER GLOBAL, CHINA INTEREST" - BBG,"*CHINA SAYS ANY TALKS HAVE TO BE EQUAL, BENEFIT EACH OTHER" - BBG.
• The Stock market has seemed to price in a lot of the recent positive sentiment. The reality still feels a little way off with tariffs still high and trade deals not yet finding a resolution. The market will need to start seeing some specifics on these deals this week, and will be hoping the meeting between the US and China bears some fruit.
• “The UK and the US are set to sign a trade deal this week, the FT reported. The UK also agreed to a pact with India.”(per BBG)
• The FOMC on Wednesday will be very important for markets, as traders start to align their views to be more inline with the Fed and have been reducing rate cut expectations. This implies the Fed Put for stocks to be a lot lower from the current market.
• The SPX has had a big bounce from its lows on 4800 handle, but we are approaching some key resistance between 5600-5800, the longer-term sellers should be active around here.