EM ASIA CREDIT: MNI EM Credit Market Update - Asia
Asia EM USD sovereign and agency spreads are trading with a weaker bias this morning, with Indonesia and Philippine benchmark bonds widening by about +4bp. Indonesia delivered a surprise rate cut yesterday, lowering its policy rate by 25bp to 4.75%, with most market participants expecting a pause ahead of the FOMC decision (Fed also cut rates by 25bp, as expected). Asia equities are broadly unchanged, though the Korea KOSPI is +1.1% higher. Newsflow today is dominated by USD issuance prospects, including China Oil & Gas, which could now launch post-FOMC, as well as a possible new 2Y $250mn deal from Chinese property developer Seazen—an important signal for real estate appetite. Seazen previously issued a $300mn 3NCNP2 in June. There are also new USD mandates for China Ping An Insurance and Mirae Asset Management.
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JGBS AUCTION: Mixed Demand Metrics For 20Y Auction
The 20-year JGB auction delivered mixed results across key metrics. The low price underperformed dealer forecasts, which were set at 98.85 according to a Bloomberg poll. Moreover, the cover ratio declined to 3.0853 from 3.1462x in the previous auction. The auction tail did, however, shorten to 0.13 from 0.18.
- As noted in the auction preview, today’s offering featured an outright yield near its cycle high, 10bps above last month’s level.
- Moreover, the 10/20 yield curve remained near its recent high, its steepest since 1999.
- This result aligns with the mixed performance observed in the 30-year JGB auction earlier this month.
- Post-auction, the 20-year JGB is little changed.
JGBS AUCTION: 20-Year JGB Auction Results
The Japanese Ministry of Finance (MOF) sells Y606.1bn 20-Year JGBs:
- Average Yield: 2.581% (prev. 2.482%)
- Average Price: 98.93 (prev. 100.23)
- High Yield: 2.591% (prev. 2.496%)
- Low price: 98.80 (prev. 100.05)
- % Allotted At High Yield: 65.3666% (prev. 20.3084%)
- Bid/Cover: 3.0853x (prev. 3.1462x)
JGBS AUCTION: 20Y Supply Faces A Yield & A Curve Near Cyclical Highs
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 10 July 2025.
- Today’s 20-year JGB auction offers an outright yield near its cycle high, 10bps above last month’s level.
- Moreover, the 10/20 yield curve remains near its recent high, its steepest since 1999.
- The 20-year JGB is at a similar valuation to last month in terms of the 10/20/30 butterfly.
- On the other hand, the auction comes amid a slight improvement in sentiment toward long-term global bonds.
- Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
- Results are due at 0435 GMT / 1235 JT.
