EM ASIA CREDIT: MNI EM Credit Market Update - Asia

The AUD/USD has had a range of 0.6429 - 0.6462 in the Asia- Pac session, it is currently trading around 0.6440, -0.25%. The AUD has been dragged lower by the move in the NZD and risk extending its correction lower in Asia. The AUD broke below its support just below 0.6500 overnight and looks likely to continue to trade heavy into the Jackson Hole meeting. Pivotal support is back towards 0.6300/50 which has been the bottom in its recent multi-month range of 0.6350-0.6650.

• Bloomberg - “Asian stocks fell after a selloff in big tech dragged Wall Street lower. US futures slid. Citadel Securities’ Scott Rubner said retail investors may slow their stock buying in September before resuming later this year.”
• "​​China Plans Broader Measures to Boost Housing Market​: Paper. China is expected to roll out a fresh batch of measures to stabilize the housing market, Securities Daily reports, citing industry analysts it interviewed." - BBG
• Bloomberg - “China’s commercial banks kept loan prime rates steady for a third month, as expected.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD410m). Upcoming Close Strikes : 0.6510(AUD520m Aug 25), 0.6600(AUD1.34b Aug 21) - BBG
• CFTC Data shows Asset managers added to their shorts -67449(Last -60729), the Leveraged community though reduced their own shorts -10121(Last -13997).
• AUD/JPY - Asia-Pac range 94.87 - 95.37, Asia is trading around 94.95. The pair broke through 95.50 overnight and has put in another lower high. Although the price is still in the 94.00-97.50 range the multiple failures towards 97.00 looks like a rounded top and with risk looking vulnerable a test of the lower end of the range looks possible. A sustained break below the 94.00/94.50 area could potentially see momentum lower pick up. Not sure we see this until Jackson Hole event risk is out the way.

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The TYU5 range has been 111-21 to 111-26 during the Asia-Pacific session. It last changed hands at 111-23+, down 0-01 from the previous close. 

• The US 2-year yield has edged higher trading around 3.752%, up 0.01 from its close.
• The US 10-year yield has edged higher trading around 4.308%.
• Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area in 10-Year yields found solid demand overnight helped by the S&P rating, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
• “TRUMP: EVERY SIGN IS POINTING TO A MAJOR RATE CUT" - BBG
• "Could somebody please inform Jerome “Too Late” Powell that he is hurting the Housing Industry, very badly? People can’t get a mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut. “Too Late” is a disaster!" - (Trump Truth Social Post)
• (Bloomberg) - It’s not the first time that when monetary policy is tweaked in New Zealand, there’s a read across for G-10 peers, especially Treasuries. The RBNZ lowered interest rates as expected, but surprised traders by implying deeper cuts into next year. The resulting yield curve steepening is likely to be replicated by fixed income peers where central banks have an easing bias.
• Data/Events:  MBA Mortgage Applications, FOMC Meeting Minutes

Fig 1: 10-Year US Yield 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

• China's bond futures are up in this morning's trade after a fourth straight day of liquidity injection during the OMO.
• The 10-year is up +0.05 at 107.985, but remains well below all major moving averages.  The nearest above is the 20-day EMA at 108.30.
• The 2-year bond future is up +0.01 to 102.34 nearing the 20-day EMA of 102.35.

• This morning's OMO injected CNY497bn of liquidity via 7-day reverse repo taking the four day tally of injections to CNY1.2bn.  
• Bonds yields are edging lower with the CGB10yr at 1.76% (from yesterday's close of 1.77%)