EM ASIA CREDIT: LOTTE Property & Development: New $ mandate

The first part of Monday trade has seen further USD selling pressure. The BBDXY is under 1208, fresh lows back to the end of 2023. Lows from earlier that year in the index were just under 1200. There doesn't appear to be a fresh catalyst for the weakness other than a continuation of Friday's sell-off, with concerns around US trade and fiscal policy dominant drivers. 

• Equity sentiment is being aided by the better US equity futures backdrop, with Trump pushing out the tariff hike on the EU to July 9. Emini futures are up around 0.95%. There is no cash US Tsy trading today due to the US holiday, but futures are weaker.
• The softer tariff stance hasn't helped the USD though.  
• Higher beta FX is outperforming, with AUD up +0.60%, to 0.6530, fresh highs back to Nov back to late Nov last year. NZD/USD is up to 0.6020, up 0.5%, but isn't above April 2025 highs yet.  
• Safe havens are still ticking up against the USD, USD/JPY near 142.25/30, against earlier highs of 143.08. EUR/USD is around 0.45% stronger, last close to 1.1415.
• USD/Asia pairs are down across the board as well. The USD/CNY fix was higher than forecast, but USD/CNH has traded sub Friday lows. 

ACGBs (YM +3.0 & XM +3.0) are stronger on a local-data-light Sydney session. 

• US equity-index futures have climbed in early Asian trading after President Donald Trump extended a deadline on aggressive European tariffs. Trump agreed to delay the date for a 50% tariff on goods from the European Union to July 9 from June 1.
• US tsy futures (TYM5) have weakened in today’s Asia-Pac dealings, with TYM5 at 109-28, -0-06+ from closing levels. Cash US tsys are closed today for Memorial Day.
• Cash ACGBs are 3bps richer.
• The bills strip has bull-flattened, with pricing +1 to +5.
• RBA-dated OIS pricing is softer across meetings today. A 25bp rate cut in July is given a 73% probability, with a cumulative 72bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• This week, the AOFM plans to sell A$400mn of the 4.25% 21 June 2034 bond on Tuesday and A$1200mn of the 4.25% 21 March 2036 bond on Friday.

Treasury Secretary Scott Bessent says US regulators may ease the supplementary leverage ratio (SLR) rule this summer, which could encourage banks to boost their Treasury holdings and reduce US Treasury yields.

• Bloomberg - “We are very close to moving” on the so-called supplementary leverage ratio, Bessent said on Bloomberg Television’s Wall Street Week.”
• “Banks have argued the rule, which requires them to hold capital when they trade against their investments in Treasuries, crimps their ability to add to those securities in stressful times, as they are treated in line with much riskier assets. Loosening the rule would encourage them to boost holdings.”
• Changing the SLR is 1 of the tools the Fed has to get US banks to be able to increase their holdings of US bonds.
• Lyn Alden on X : “That's one of the levers they can pull to let banks eat more bonds. It has QE-like effects; positive for liquidity. https://x.com/LynAldenContact/status/1925951076538179967”
• The US bond market is pretty short and leaning quite bearish so should we see something of this nature come to fruition it could have a knee-jerk response lower in yields.
• U.S. Treasury Secretary Scott Bessent told Bloomberg on Friday that the world's largest economy is "going big" on digital assets. 
• “The US Treasury could experience a surge in demand for government debt from the digital asset sector, potentially reaching $2 trillion over the next several years, according to Treasury Secretary Scott Bessent. https://news.bitcoin.com/bessent-biden-starved-crypto-trumps-plan-could-flood-treasuries-with-trillions/”
• WSJ - “Big banks including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are teaming up to launch a shared crypto stablecoin. https://www.reuters.com/business/finance/some-us-banks-explore-venturing-into-crypto-with-joint-stablecoin-wsj-reports-2025-05-23/”