EM ASIA CREDIT: Hanwha Energy USA: New $ mandate FV

The 20-year JGB auction delivered very poor results across key metrics. The low price underperformed dealer forecasts, which were set at 99.80 according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.5007x from 2.9639x in the previous auction, and the auction tail lengthened dramatically from 0.34 to 1.14 – the longest since 1987. 

• As noted in the auction preview, today’s offering featured an outright yield near its cycle high, approximately 5bps above last month’s level.  
• Moreover, the 10/20 yield curve remained near its recent high, its steepest since 1999.
• As a consequence, this result is likely to be seen as significantly worse than the performance observed in the 30-year JGB auction earlier this month.
• Post-auction, the 20-year JGB has cheapened 6bps. 

The Japanese Ministry of Finance (MOF) sells Y750.9bn 20-Year JGBs:

• Average Yield: 2.453% (prev. 2.349%)
• Average Price: 99.29 (prev. 100.69)
• High Yield: 2.540% (prev. 2.374%)
• Low price: 98.15 (prev. 100.35)
• % Allotted At High Yield: 80.8791% (prev. 40.8163%)
• Bid/Cover: 2.5007x (prev. 2.9639x)

RBA-dated OIS pricing is flat to slightly softer across meetings today, with July/August leading, ahead of tomorrow’s RBA Policy Decision. 

• A 25bp rate cut in May is given a 97% probability, with a cumulative 77bps of easing priced by year-end.
• Notably, today’s moves leave meetings pricing 3-42bps firmer than levels before the release of Q1 CPI data on April 30.

Figure 1: RBA-Dated OIS – Current Vs. Pre-Q1 CPI

Source: MNI - Market News / Bloomberg