EM ASIA CREDIT: MNI EM Credit Market Update - Asia
US Treasury yields are marginally lower at 4.0% during the Asia session, with the FOMC decision out tomorrow (25bp cut expected). We followed LATAM, where Argentina sovereign bonds rebounded by 2 points as President Milei presented a 2026 budget that would enable higher spending to appease voters and provincial leaders. In Asia, EM USD sovereign and agency spreads are trading in a narrow range of -1bp to +2bp this morning, with no significant outliers. Asia equities were mostly in positive territory, with the Korean KOSPI down 1%. The Hang Seng is +1.8%, led by Baidu (+16%).
Baidu equity was in favour following plans to use and sell more in house chips, reducing reliance on other chipmakers. Baidu bonds were unchanged. In other news, we examined reports that Indonesia would raise its stake in Freeport Indonesia, and unless FCX loses operational control of the Grasberg mine, see limited risk to credit for now, though we continue to monitor developments. Into the close Indonesia surprised markets with a 25bp cut to its benchmark rate (now 4.75%), with most economics expecting a pause ahead of the FOMC decision. No new issues today, though investor meetings for a USD benchmark deal from Korea Oil deal start tomorrow.
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Historical bullets
GILTS: Bull Flattening After Friday's Bear Steepening
Gilts follow peers away from Friday’s late lows, curve flattening.
- Little in the way of concrete drivers apparent (similar to much of Friday’s bear steepening, with ongoing focus on fiscal/issuance outlooks and Dutch pension reform noted back then).
- More broadly, there wasn’t much in the way of concrete process at the Trump-Putin summit, with Trump set to meet with his Ukrainian counterpart later today.
- Futures as high as 91.23 after trading 90.91 on Friday.
- Still, bears remain in technical control. Fresh extension lower would target the May 29 low (90.59).
- Conversely, bulls need to clear the 50-day EMA (92.05). Clearance of this average is required to highlight a potential reversal.
- Yields 2.5-3.5bp lower.
- The early June high in 10-Year yields (3.702%) remains intact.
- A reminder that 50s registered a fresh cycle high on Friday, but bears failed to force a test of 5.00%.
- 2s10s hovers around 75bp, failing to test July highs around the 80bp mark.
- 5s30s registered a fresh cycle closing high on Friday, printing the highest level seen since ’17 and exposing the 150bp level (last 146.6bp).
- Light dovish moves in GBP STIRs since the pre-gilt open bullet.
- SONIA futures flat to +2.0 on the day.
- Wednesday’s CPI data headlines the domestic calendar this week, see our morning STIR bullet for more colour on that front and expect our usual detailed preview in due course.
- BoE-dated OIS prices 14bp of easing through December and 24.5bp of cuts through February.
SILVER TECHS: Bullish Theme Still In Play
- RES 4: $41.064 - 1.764 proj of the Apr 7 - 25 - May 15 swing
- RES 3: $40.285 - 1.618 proj of the Apr 7 - 25 - May 15 swing
- RES 2: $40.000 - Psychological round number
- RES 1: $39.655 - 1.500 proj of the Apr 7 - 25 - May 15 swing
- PRICE: $38.081 @ 08:38 BST Aug 18
- SUP 1: $36.216 - Low Jul 31
- SUP 2: $35.285 - Low Jun 24
- SUP 3: $33.940 - 50.0% retracement of the Apr 7 - Jul 23 bull leg
- SUP 4: $32.958 - Low Jun 2
Trend signals in Silver remain bullish. The pullback off the late July highs is considered corrective - particularly as prices have recovered off support at the 50-day EMA, now at $37.038. A clear break of it is needed to strengthen a short-term bearish threat and allow for a deeper retracement. This would open $35.285, the Jun 24 low. For bulls, a resumption of gains would refocus attention on the next objective at $39.655 a Fibonacci projection.
GOLD TECHS: In A Range
- RES 4: $3547.9 - 1.764 proj of the Feb 28 - Apr 3 - Apr 7 price swing
- RES 3: $3500.1 - High Apr 22 and bull trigger
- RES 2: $3451.3 - High Jun 16
- RES 1: $3409.2/3439.0 - High Aug 8 / 23
- PRICE: $3351.1 @ 08:33 BST Aug 18
- SUP 1: $3268.2 - Low Jul 30
- SUP 2: $3248.7 - Low Jun 30 and the bear trigger
- SUP 3: $3204.7 - Low May 20
- SUP 4: $3121.0 - Low May 15 and key support
A bull cycle in Gold remains intact and this is highlighted by moving average studies that remain in a bull-mode position. This sideways trend that has been in place since the Apr peak appears to be a corrective phase. A resumption of gains would open $3439.0, the Aug 23 high. Key resistance and the bull trigger is at $3500.1, the Apr 22 low. On the downside, first support to watch lies at $3268.2, the Jul 30 low.
