EM ASIA CREDIT: MNI EM Credit Market Update - Asia

At the Tokyo lunch break, JGB futures are slightly stronger, +8 compared to the settlement levels, after giving up overnight gains.

• “Japan lost its position as the world's largest creditor nation for the first time in 34 years, despite posting a record amount of overseas assets. Germany's net external assets totaled ¥569.7 trillion, surpassing Japan's ¥533.05 trillion, due to its substantial current account surplus and strong trade performance.” (per BBG)
• ICYMI, BoJ Governor Ueda made remarks at an event in Tokyo earlier. The comments appeared to cover a lot of familiar ground since the last BoJ policy update. Ueda reiterated the driver of the recent downside forecast revisions for both growth and inflation (trade uncertainties). Still, the central bank will adjust the degree of monetary accommodation if the economy improves as expected.
• Cash US tsys are 1-3bps richer, with a flattening bias, in today's Asia-Pac session after yesterday's holiday.
• Cash JGBs are flat to 10bps richer across benchmarks, with the curve flatter. The benchmark 40-year yield is 9.5bps lower at 3.462% ahead of tomorrow's supply.
• The upcoming 40-year JGB auction will be closely watched following a lacklustre 20-year sale last week - a sign of the caution that still runs deep among long-end investors.
• Swaps have twist-flattened, with rates 2bps higher to 4bps lower. Swap spreads are wider.

ACGBs (YM +3.0 & XM +5.0) are stronger with US tsys 1-3bps richer in today’s Asia-Pac session after yesterday’s holiday.

• Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at -16bps.
• The bills strip richer, with pricing +1 to +3.
• RBA-dated OIS pricing is showing a 25bp rate cut in July as a 73% probability, with a cumulative 75bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar has been light. The ANZ-Roy Morgan Consumer Confidence Index fell to 87 in the week of May 19 to May 25 from 88.8 in the prior week.
• The focus remains on tomorrow’s April CPI, which is forecast to moderate to 2.3% y/y from 2.4%. The trimmed mean has been around 2.7% y/y for four consecutive months. There will be limited updates to the services components being the first month of the quarter.
• Some of the components of Q1 GDP are also released this week, namely construction (Wed) and private capex (Thu).
• April retail sales print on Friday and are projected to rise 0.3% m/m after increasing the same amount in March.

• China bond futures are marginally lower today, following the injection of liquidity during the OMO.  
• The 10YR future is down -0.05 at 108.80 having bounced off the 20-day EMA of 108.84.  
• The 50-day EMA sits below at 108.73.
• The 2YR future is down -0.02 at 102.40 and remains below all major moving averages.  The nearest being the 20-day EMA of 102.46.
• The 10YR CGB is higher by +0.05bp today at 1.69%
• Industrial Profits for April were released today and continue to trend in the right direction, improving on March.   
• Next key data will be Official PMIs on the 31st.