EM ASIA CREDIT: MNI EM Credit Market Update - Asia
Asia EM $ credit is mixed in the morning session, with spreads ranging between -2bp and 2bp. There were no notable outliers, though it’s worth highlighting that Indonesia (INDON 10/35s, -2bp) agreed to a trade deal with the U.S. at a 19% rate—significantly lower than the previous 32% indicated in the Trump tariff letter. Additionally, Indonesia’s central bank cut rates by an unexpected 25 basis points yesterday.
In other news, Korea Gas may increase LNG imports from the U.S. as part of ongoing trade negotiations, potential doubling U.S. imports. Adani Port spreads are 3bp wider following gains related to $ buyback announcements yesterday. Finally, the Bank of the Philippine Islands posted strong H1 results, reporting net income growth of 8% year-on-year. There were no new issues this morning.
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JGBS: BoJ Leaves Policy Rate Unchanged But Announces Taper Change
JGB futures have weakened slightly to session lows, -10 compared to settlement levels, following the BoJ Policy Decision.
- The BoJ held its policy rate steady at 0.50%, as widely expected, with a unanimous 9-0 vote.
- The BoJ will maintain its current bond-buying plan through March 2026, but starting April 2026, it will reduce JGB purchases by ¥200 billion per quarter.
- The decision to begin tapering, however, was not unanimous — Board Member Tamura dissented, arguing for a faster reduction of ¥400 billion per quarter and a more market-driven long-term rate framework. The BoJ will decide on further tapering plans for April 2027 and beyond at the June 2026 policy meeting.
- The BoJ emphasised that tapering will proceed in a predictable and cautious manner, but left the door open to adjustments if market conditions require.
- The BoJ reaffirmed its intention to respond flexibly to any sharp rise in yields. It views price trends as broadly in line with its 2% inflation target in the second half of its outlook period.
- Cash JGBs are flat to 3bps cheaper across benchmarks, with the 10-year underperforming. The benchmark 10-year yield is 3.2bps higher at 1.471% versus the cycle high of 1.596%.
- Swap rates are 1-3bps higher, with a mild steepening bias. Swap spreads are mixed.
MNI: BOJ: TAMURA PROPOSES JPY400 BLN JGB TAPER UNTILQ1 2027
- BOJ: TAMURA PROPOSES JPY400 BLN JGB TAPER UNTILQ1 2027
- BOJ: TAMURA PROPOSAL VOTED DOWN
CHINA: Bond Futures Higher
- China's bond futures are up today as equity markets weaken.
- The 10YR future is up +0.06 to 109.07 and remains above all major moving averages, the nearest being the 20-day EMA at 108.90
- The 2YR future is up +0.06 to 102.52 and has traded above the 50-day EMA of 102.50. Above is the 100-day EMA of 102.62 and the 200-day EMA of 102.78.
- The move in cash bonds has been less pronounced with the 10YR CGB at 1.69%
