EM ASIA CREDIT: MNI EM Credit Market Update - Asia

• China bond futures are down in the morning session with the 10-year having its largest one day fall since May.  
• The 10-year is down -0.20 at 108.43 and has traded below all major moving averages which it had not done since late May.  
• The PBOC withdrew liquidity during this morning's OMO marking three consecutive days of withdrawals.  

• The 2-year future is also down, by -0.04 to 102.36 and remains below all major moving averages.  The nearest being the 20-day EMA of 102.43.
• The 10YR CGB is higher by +1.5bp to 1.71%

Gold prices have trended moderately lower today following the conclusion of a trade deal between Japan and the US lifting optimism that others, especially the EU and China, may also be able to reach an agreement before August 1. Bullion had a strong start to the week rising almost 2.5% over Monday/Tuesday. Today it is down 0.2% to $3423.6/oz but off the intraday low of $3419.27 with the BBDXY USD index and US yields slightly higher. 

• Gold continues to be supported by concerns over Fed independence.
• Silver is also lower at -0.1% to $39.25 after rising to $39.38 but off today’s low of $39.13. It was up almost 3% over Monday/Tuesday.
• US imports from Japan, including autos, will face a 15% tariff down from the 24% announced in April but higher than the current average below 5%. This lower rate is in exchange for $550bn of Japanese investment in the US.
• Treasury Secretary Bessent is scheduled to meet China officials in Stockholm next week with the aim of extending the current hold on tariffs.
• The US-Japan trade deal has driven an improvement in risk appetite with equities higher (Nikkei +3.2%, Hang Seng +1.1% & S&P e-mini +0.2%). Oil prices are higher with WTI +0.3% to $65.48/bbl and copper up 0.9%.
• Later June US existing home sales and preliminary July euro area consumer confidence print. 

• The PBOC issued a release showing that foreign institutions held CNY4.3 trillion of bonds via the interbank market.  
• This accounts for 2.5% of total 'custody volume' of bonds.  
• Overseas institutions hold CNY2.1tn of CGBs, CDs CNY1.15tn, Policy Bonds CNY810bn.  
• There are over 1,170 of overseas institutions who have access to the interbank market with just over 70% via Bond Connect in Hong Kong.  
• The release comes days after a China Daily article suggesting that China will over time move away from investing US Treasuries.