EM ASIA CREDIT: MNI EM Credit Market Update - Asia
The U.S. cash treasury market is closed today for the Juneteenth holiday. Overall markets in Asia are week, with Equities down 1-2%, including the Hang Seng (-2%) and the Indonesia JCI index (-2.3%). We followed on from LATAM, where spreads generally widened 2-5bp. In Asia, $ credit is up to +4bp wider (S.Korea +4bp).
In the morning session, Thailand (-3bp) had been outperforming until the Thai army chief raised concerns about domestic politics. Investors were reminded of the 2014 coup d'état, and we widened into the close (+1bp on the day). Late in the day the Philippines central bank cut rates 25bp to 5.25% as expected.
In other news, LG Electronics is reported to restart IPO plans for its Indian unit (valued at c. $1.7bn). Indonesian Perusahaan Listrik Negara was also reported to pay INR3.3T in dividends, which looks higher than rating assumptions. We also completed a fair value assessment of a proposed Hanwha Energy USA $ 3y (z+95bp).
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OPTIONS: Expiries for May20 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1015(E1.1bln), $1.1070-75(E1.8bln), $1.1100-05(E780mln), $1.1195-00(E1.5bln), $1.1245-50(E1.2bln), $1.1300(E1.1bln)
- USD/JPY: Y145.00($795mln), Y145.50($1.0bln), Y146.00($621mln)
- USD/CAD: C$1.3900-15($807mln)
GILTS: Follow Wider Core FI Higher, 30-year Syndi Expected Today
Gilt futures extend higher alongside core FI peers, now +28 ticks today at 91.78 and outperforming Bunds. As noted above, there hasn’t been an obvious fundamental driver of the latest bid. A bear cycle in Gilts remains in play following the recent impulsive selloff, and rallies short of the 20-day EMA at 92.20 will be considered corrective. Initial resistance shielding this level is 92.03, the May 16 high. Yesterday’s low at 90.86 provides support.
- 10-year yields are down 3.7bps to 4.63%, with the Gilt/Bund spread tightening 1.5bps to 205.5bps.
- The curve has lightly bull flattened, with 2s10s down 1bp and 10s30s down 0.5bps.
- The DMO is expected to launch the new 5.375% Jan-56 gilt today. MNI expects a GBP5.5-8.5bln transaction size.
- Yesterday evening saw BoE’s Dhingra outline the thought process behind her dovish dissent last week, telling the FT that "I get to pick times when I want to be able to make a more categorical statement about where I think the economy is headed”.
- Comments from BoE hawkish dissenter and chief economist Pill are due this morning (09:00). He previously noted that he will flesh out the thoughts that drove his hawkish dissent at this event.
- UK CPI data, due tomorrow, headlines this week’s UK data calendar. MNI’s preview will be out later this morning.
EURIBOR OPTIONS: Outright Put sellers
- ERM5 97.87p, sold at 1.25 in 10k.
- ERM5 97.81p, sold at half in 20k.
