EM ASIA CREDIT: MNI EM Credit Market Update - Asia

ACGBs (YM -6.0 & XM +1.5) are dealing mixed on a data light Sydney session, with the short-end under pressure as markets re-assess tariff-tied risks to global trade and the Trump Admin's efforts to meddling with the Federal Reserve's independent policy making.

• Risk-on sentiment extended into today’s Asia-Pacific session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence).
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• Cash US tsys have twist-flattened in today's Asia-Pac session, with yields 2bps higher to 8bps lower.
• Cash ACGBs are 6bps cheaper to 1bps richer with the AU-US 10-year yield differential at -10bps.
• Swap rates are flat to 5bps higher, with the 3s10s curve flatter.
• The bills strip is cheaper with pricing -4 to -9.
• RBA-dated OIS pricing is 2-10bps firmer across meetings today. A 50bp rate cut in May is given a 14% probability, with a cumulative 114bps of easing priced by year-end (based on an effective cash rate of 4.09%).

At the Tokyo lunch break, JGB futures are weaker, -32 compared to the settlement levels, but above session lows.

• Cash US tsys have twist-flattened in today’s Asia-Pac session, with yields 2bps higher to 8bps lower. This comes with risk-on sentiment extending into today’s Asia-Pac session after US President Trump stated that he had no intention of firing Fed Chair Powell (which has been a cause of concern recently and around the outlook for Fed Independence). Such fears were a further weight on broader US asset related sentiment.
• Trump also stated that the final tariff number for China wouldn't be near the current 145%. He also expressed optimism around trade deals with lots of countries and spoke of the large investment agreements reached for flows into the US.
• The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 4.5bps higher to 5bps lower. The benchmark 10-year yield is 3.6bps higher at 1.351% versus the cycle high of 1.596%.
• The swaps curve has also twist-flattened, with rates 3bps higher to 4bps lower.  
• Today, the local calendar has been light, with Jibun Bank PMIs as the highlight. The Tertiary Industry Index is due later. Tomorrow will see PPI Services. 

AUDUSD reached a high of 0.6405 earlier but has been unable to hold breaks above 64c. It is currently up 0.4% to 0.6394 supported by more positive risk sentiment with equities and commodities higher. The greenback has trended lower since it peaked early in the session following President Trump’s comments that he wouldn’t sack Fed Chair Powell and that China’s tariffs would finish below the current 145%. The USD index is still up 0.1% today.

• AUDNZD has recently exceeded 1.07, a level it has struggled to hold. The pair is up 0.3% to 1.0704, close to the intraday high.
• Risk-averse currencies are underperforming today leaving AUDJPY up 0.7% at 90.72 following a high of 91.04 and AUDEUR +0.6% to 0.5608 after reaching 0.5621. AUDGBP is also +0.6% to 0.4804.
• Australia’s S&P Global preliminary April PMIs showed steady but moderate growth but it was driven by the domestic economy though with global trade developments weighing on exports and confidence.
• Equities are generally stronger with the S&P e-mini up 1.4%, ASX +1.6% and Hang Seng +1.6% but CSI 300 flat. Oil prices continue to rise with WTI +0.6% to $64.04/bbl. Copper is 0.3% higher and iron ore around $99-100/t.
• Later there is more Fedspeak with Goolsbee, Musalem, Waller, Hammack and Kugler appearing. US preliminary April S&P Global PMIs, March housing data and the Fed’s Beige Book are released. European April PMIs and euro area February trade print.
• The IMF/World Bank & G20 finance ministers/central bank governors meetings take place. The ECB’s Lane and Cipollone participate in panels and BoE’s Bailey and Breeden also appear, while BoE’s Pill speaks at another event.