EM ASIA CREDIT: MNI EM Credit Market Update - Asia

RBA-dated OIS pricing is 2-4bps firmer across meetings after today’s Q1 CPI data.

• Q1 headline and underlying inflation printed 0.1pp higher than expected but the trimmed mean at 2.9% y/y is below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
• The data is close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
• A 50bp rate cut in May is given a 3% probability (10% before the data), with a cumulative 113bps (117bps before) of easing priced by year-end.

Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI

Source: MNI - Market News / Bloomberg

TYM5 has traded a little higher with a range of 112-04 to 112-09 during the Asia-Pacific session. It last changed hands at 112-06, up 0-01 from the previous close.

• The US 10-year yield is a little lower, dealing around 4.16%, down from its close around 4.1716%.
• The US 2-year yield is unchanged, dealing around 3.65%.
• US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light.
• “The trade deficit widened to a record in March, and consumer spending slowed, contributing to the GDP growth slowdown.”(per BBG)
• MNI Economist re GDP - “Domestic demand should look somewhat more robust but will be clouded by question marks over the extent to which areas of strength were driven by tariff front-running”.
• Month End flow will continue to be a key driver tonight.
• The 10-year Yield, has put in a lower high around 4.40% and has broken through the recent support around 4.25%. The next support is towards the 4.10 area which should find supply once more.
• Data/Events :  ADP private jobs data, GDP, Chicago PMI, PCE and Home Sales. 

AUDUSD jumped on the moderately higher-than-expected Q1 CPI data that included upward revisions to Q4 and Aussie is now outperforming the rest of the G10, despite mixed equities and lower commodity prices. It reached a low of 0.6379 before the data and then jumped to 0.6407 following the print but has struggled to hold the break above 64c and is currently around 0.6398 to be up 0.2% today. The USD index is little changed.

• AUDNZD has trended higher through most of the session and is now +0.3% to 1.0792, close to today’s peak.
• AUDJPY is up 0.2% to 91.09, close to the intraday high of 91.22. AUDEUR rose to 0.5634 following Australia’s inflation data and is now +0.3% to 0.5624. AUDGBP is also 0.3% higher at 0.4777 off the peak of 0.4781.
• Equities are mixed with the ASX up 0.2% but Hang Seng down 0.4% and S&P e-mini -0.5%. Oil continues to sell off with WTI -0.9% to $59.90. Copper is down 1.2% and iron ore is around $98/t.
• Later US Q1 GDP & employment costs, March core PCE prices, April MNI Chicago PMI & ADP employment print. Also preliminary April euro area CPI, Q1 GDP including Germany, France & Italy, German March retail sales & unemployment are released. BoE’s Lombardelli speaks.