EM ASIA CREDIT: MNI EM Credit Market Update - Asia
U.S. 10y treasury yields are 2bp lower at 4.6%. Asia EM credit is weaker with govie/agency $ spreads up to +8bp wider, Indonesia (+8bp) and the Philippines (+7bp) the outliers (+8bp). Indonesia's central bank announce a 25bp rate cut as expected yesterday, and today reported that the current account deficit shrank to $177m last quarter (0.1% of GDP). In the Philippines, President Ferdinand Marcos Jr. is asking Cabinet secretaries to resign following poor Senate election results. The finance chief answered the call and has resigned. There will be a reshuffle. In other news, China Vanke received more secured funding support from Shenzhen Metro, subject to shareholder approval of new collateral. Lenovo reported FY results below consensus, and we see leverage pick up. We also have a new $ 3.5y deal from China Hongqiao. The IPT is 7.4% area, we have estimated fair value at 6.95%.
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EU: VdL-Countries 'Lining Up' To Work w/EU Amid Global Uncertainty
European Commission President Ursula von der Leyen has claimed that countries from around the world are "lining up" to work with the EU on reaching trade agreements amid significant geopolitical and economic uncertainty, reports Politico. VdL says "In a more and more unpredictable global environment, countries are lining up to work with us," and having met with leaders from Iceland, New Zealand, Malaysia, the Philippines, Canada, India and the United Arab Emirates, many are looking for a "reliable partner" according to the Commission president.
- VdL claims that signs of increasing support for the EU from within the Union act as a positive signal for potential partners, "That says something. In the middle of the chaos, Europe stands firm, grounded in values, ready to shape what comes next."
- Von der Leyen's comments come in the wake of Italian PM Giorgia Meloni's White House meeting last week with US President Donald Trump, who said that, with the EU, "There will be a trade deal, 100%, but it will be a fair deal". He also emphasised that there would be "no rush" on the issue.
- The fact that the Trump admin is looking to discuss trade with national leaders, rather than EU officials (under whose competency trade issues fall) will remain a source of chagrin in Brussels. SCMP reports VdL and Council President Antonio Costa are looking to travel to China later in the year for talks with President Xi Jinping in an effort to bolster ties.
FOREX: FX OPTION EXPIRY
Of note:
USDJPY 1.61bn at 140.00 (thu).
USDCAD 1.91bn at 1.3800 (fri).
USDJPY 1.07bn at 140.00 (mon).
- EURUSD: 1.1450 (782mln).
- USDJPY: 140.55 (330mln).
- AUDUSD: 0.6400 (804mln).
- USDCNY: 7.3000 (586mln).
- EURSEK: 10.9000 (334mln).
GILTS: Twist Steepening Early Today, Dovish BoE Repricing Extends
Dovish repricing in BoE-dated OIS supports the front end of the curve, while weakness in long end Tsys since Thursday’s close weighs on 10+-Year gilts.
- Futures 92.25 last (92.09-40 range).
- Initial support and resistance unchanged at 91.73/92.63.
- Yields are 3bp lower to 3bp higher, curve twist steepens.
- 2s10s ~10bp below cycle closing highs, last 68.2bp.
- 5s30s ~2.5bp below cycle closing highs, last 133.1bp.
- Risks seem titled towards continued steepening given the UK’s economic and fiscal fragility, while the macro environment adds further weight to that view.
- Illiquid market conditions in the long end and spill over from Tsys have provided further sources of pressure in recent weeks.
- BoE-dated OIS now showing 91bp of cuts through year-end vs. 88bp early today.
- Little of note on the UK calendar on Tuesday, which will leave post-holiday adjustments and macro cues at the fore.
- In addition to the Wednesday risk events outlined in our GBP STIR bullet, note that tomorrow will see the release of public sector finance data and the resulting DMO remit revision. We will provide greater colour on this later today.
