INDIA: India-Russia Trade May Come Into Focus Again After Poland Incident
Following Russian drones violating Poland’s (NATO member) airspace, further discussions around punitive tariffs for purchasers of Russian energy are likely to come to the fore again. Increased sanctions on Russia were already being discussed with President Trump saying the US would follow the EU. He has already added a 25% punitive duty on imports from India but there is a risk now that could rise but he also said this week he had spoken with his “good friend” Indian PM Modi and that trade negotiations were ongoing.
- Before Russia invaded Ukraine in February 2022, less than 1% of India’s oil imports came from Russia with the bulk from the Middle East. Visual Capitalist noted that in May it had risen to 40% with the Middle East around the same at 39%, as the former is priced at a discount to the latter. India has to import around 85% of its crude.
- This has driven Russia’s share of Indian imports to around 9% of the 2024 total up from 1.5% in 2021.
India imports % total
Source: MNI - Market News/LSEG (IMF DOTS)
- China remains the main source at 15% in 2024 and this year to date has trended marginally higher. China’s share of Indian exports more than halved between 2020, when there were significant border skirmishes, and 2022 from 6.9% to 3.3%. Recent meetings between PM Modi and President Xi may change that.
- The US is India’s primary export destination and that share has risen in H1 2025 to around 23% from 2024’s 18% due to frontloading of shipments ahead of US import duties. The euro area is the next largest accounting for 15.9% in 2024 followed by the Middle East at 15.7%.
India export destinations % 2024 total
Source: MNI - Market News/LSEG (IMF DOTS)
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STIR: RBA Dated OIS Slightly Firmer Ahead Of Today’s RBA Decision
At the time of writing, RBA-dated OIS pricing is slightly firmer on the day across meetings ahead of today’s RBA Policy Decision.
- A 25bp rate cut this week is given a 97% probability, with a cumulative 59bps of easing priced by year-end (based on an effective cash rate of 3.84%).
Figure 1: RBA-Dated OIS – Current Vs. Yesterday
Source: Bloomberg Finance LP / MNI
JGBS: Treading Water Ahead Of Today's US CPI
At the Tokyo lunch break, JGB futures are weaker but off lows, -8 compared to the settlement levels.
- Cash US tsys are little changed in today's Asia-Pac session ahead of today's US CPI data.
- (Bloomberg) "Markets remain skeptical that the Bank of Japan will raise rates soon, even as inflation proves sticky. Economists pencil in one hike by year-end, but with the GDP deflator likely to exceed 3%, homegrown inflation is showing signs of entrenchment, adding to the urgency to tighten policy."
- Cash JGBs are showing a modest sell-off across benchmarks, led by the 4-year. The benchmark 10-year yield is 0.4bp higher at 1.495% versus the cycle high of 1.616%.
- Swap rates are little changed. Swap spreads are mixed.
CHINA PRESS: China Stock Market Hit New High This Year
The benchmark Shanghai Composite Index hit a new high this year, reaching an intra-day peak of 3,650 on Monday, China Securities Journal reported. The turnover in the A-share market exceeded CNY1.8 trillion, with over 4,100 stocks rising and over 80 of them hit the day limit, the newspaper said.
