EM ASIA CREDIT: MNI EM Credit Market Update - Asia
Asia EM credit is weaker today with govie/agency $ spreads up to 7bp wider, Indonesia (+7bp) and the Philippines (+6bp) the outliers. Indonesia announced it would delay April trade balance data until June, while the Philippines central bank guided to GDP growth at the low end of 2025-27 goals. In terms of newsflow, Reliance Industries announced it had agreed a $2.9bn loan, that’s been on the cards for 6 months. On the issuance front we have Shandong Gold with a 3y $benchmark. The IPT is 5.2% area and we have estimated FV around 4.65%.
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JGBS AUCTION: Poor Demand Metrics For 20Y Auction
The 20-year JGB auction delivered poor results across key metrics. The low price underperformed dealer forecasts, which were set at 100.40 according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.9639x from 3.4594x in the previous auction and the auction tail lengthened dramatically to 0.34 from 0.20.
- As noted in the auction preview, today’s offering featured an outright yield at a cycle high, 15bps higher than last month’s auction.
- Moreover, the 10/20 yield curve was at its steepest since 1999 and the 20-year JGB was at its cheapest valuation within the 10/20/30 butterfly since early 2023.
- As a consequence, this result is likely to be seen as significantly worse than the mixed performance observed in the 30-year JGB auction earlier this month.
- Post-auction, the 20-year JGB is little changed.
JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y750.9bn 20-Year JGBs:
- Average Yield: 2.349% (prev. 2.278%)
- Average Price: 100.69 (prev. 96.20)
- High Yield: 2.374% (prev. 2.294%)
- Low price: 100.35 (prev. 96.00)
- % Allotted At High Yield: 40.8163% (prev. 44.1031%)
- Bid/Cover: 2.9639x (prev. 3.4594x)
JGBS AUCTION: 20Y Supply Faces A Cyclical High Yield & A Steeper Curve
The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs.
- Today’s 20-year JGB auction offers an outright yield at its cycle high, approximately 15bps above last month’s level.
- Moreover, the 10/20 yield curve has steepened dramatically over the past month, hitting its steepest since 1999.
- Additionally, the 20-year JGB has cheapened to its cheapest valuation within the 10/20/30 butterfly since early 2023.
- On the other hand, the auction comes amid souring sentiment toward long-term global bonds.
- Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
- Results are due at 0435 GMT / 1235 JT.
