EM ASIA CREDIT: MNI EM Credit Market Update - Asia
U.S. 10y treasury yields are 1bp lower today at 4.4% with investors digesting news that according to US Treasury Secretary Bessent, talks between China and the U.S. have "stalled". Political and legal hurdles to President Trumps tariff plans creating more uncertainty, but also somewhat showing his hand.
Asia EM credit ended the day mostly better with govie/agency $ spreads up to 5bp tighter. The outperformer being the Philippines (3/35s, -5bp), the underperformer Malaysia. Our Malaysian $ proxy, KNBZMK 09/34s, +2bp on the day.
In the corporate space, Adani Ports and Special Economic Zone bonds continue to tighten at the short-end following news of possible $ bond buybacks, and the company announced later in the session that it had raised INR50bn (c. $585m) to fund it. Finally, Indian auto parts maker Samvardhana Motherson FY results were solid, with leverage materially lower on equity and compulsorily convertible debenture raising during the course of the year. No new issues this morning.
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GILTS: Yield Support In 10s Broken
Gilts rally at the open and extend higher in recent trade, taking cures from global peers since yesterday’s close.
- Futures through yesterday’s high, with our technical analyst’s next level of upside interest located at 94.00.
- Contract tops out at 93.62 for now.
- Yields 2-4bp lower, curve flattens.
- 2s10s and 5s30s continue to hold above 60bp & 120bp, respectively.
- 10s trade through the 4.460% level we have identified in recent days, with the next downside level of note coming in at the trendline support drawn off the Dec 8 ’21 lows (4.411%).
- Little of note on the UK data calendar today.
- Meanwhile, BoE MPC member Lombardelli will appear at 16:30, although scope for meaningful monetary policy limits may be limited by the nature of her appearance, as she launches the Bank’s new economics teacher training partnership with Manchester University.
- As such, expect macro cues (tariff headlines, European national level inflation data and U.S. economic data) to set the tone for most of the day.
- The exception being setup for and reaction to this morning’s GBP4.5bn auction of the 4.375% Mar-28 gilt.
GERMANY: RTRS-SPD Approves Coalition Deal w/CDU/CSU
Reuters wire reporting that, according to two sources, the membership of the centre-left Social Democratic Party of Germany (SPD) has approved the coalition deal with the centre-right Christian Democratic Union/Christian Social Union (CDU/CSU). If confirmed, this would set up a rubber-stamp vote in the Bundestag on 6 May to approve CDU leader Friedrich Merz as the next chancellor.
- The report claims that 84% of those members that votes approved the deal. The story does not say what turnout was. In order for the agreement to be approved, a simple majority of those voting was required with a turnout threshold of 20%. The SPD has around 358k grassroots members. On 29 April, SPD General Secretary Matthias Miersch confirmed that the turnout threshold had been reached.
- At around 1100CET, Chancellor Olaf Scholz will convene the final meeting of his minority Green-SPD cabinet. The sole decision will be to approve a 3.74% increase in statutory pensions effective July 1.
- On taking office, one of Merz's first actions is set to be a tour of key European capitals, with a visit to Paris for talks with President Emmanuel Macron on 7 May, the day after the Bundestag vote. The tour is also due to see Merz travel to Warsaw and Kyiv.
JPY: The Yen is testing broader lows
- Some downside continuation for the Yen as Noted earlier since the EU Cash Govie open, nothing fast, but at new intraday low against the USD, GBP, EUR, while the Aussie still lags, although it is still the best performer, up 0.57% at present following the Australian CPI beat.
- The Overnight Japanese Data miss is likely playing a part, although the Overnight moves were more limited.
- USDJPY is eyeing Yesterday's high at 142.76.
