EM ASIA CREDIT: MNI EM Credit Market Update - Asia
US Treasury yields are 1bp higher at 4.2% with the US government shutdown now in progress. In LATAM, Argentina sovereign bonds fell about 3 points as FX weakening forced the government to intervene again. Asia EM USD sovereign and agency spreads are 1-2 basis points wider today, with no particular outliers. Regional equities are higher, and gold hit new highs on shutdown concerns. On the primary market front, Vedanta priced its 7NC2 deal overnight at 9.125% through our fair value estimate (9.35%), otherwise no new deals today. In terms of newsflow, Indonesian sovereign fund, Danantara, is reported increase its stake in Freeport Indonesia by 12% (taking in to 63%). LG Electronics confirmed a partial IPO of its Indian business next week, aiming to raise USD1.3bn. LG Chem plans to monetise part of its LG Energy Solutions holdings and raise USD1.4bn. Finally, Taiwan rejected the idea of helping the US produce half its chip demand domestically.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURIBOR OPTIONS: J.P.Morgan Recommend Conditional Bull Steepener
J.P.Morgan recommended initiating Dec25/Dec26 conditional bull steepeners (buying ERZ5 98.0625 calls vs. selling 0RZ5 98.0625 calls) late on Friday.
- They noted that “with the ERZ5/Z6 curve now inverted, we have a bias towards some steepening. We believe that if increased ECB easing expectations are priced into the curve it will likely be front loaded into 4Q25 or 1Q26”. They also noted that “the Dec25/Dec26 curve exhibits a strong negative directionality versus yields and is currently too flat on a 3-month regression basis”.
EGB FLOWS: Big Volumes in Eurex Rolls
These will not show in Today's pace, but the Eurex rolls are dominating in German Govies, some big Volumes in Bund, already 339k lots traded in September, but all spread related, which makes sense given the heavy Data Week ahead.
PACE:
- Buxl: 17%.
- Bund: 15%.
- Bobl: 16%.
- Schatz: 14%.
- BTP: 9%.
- BTS: 10%.
- OAT: 15%.
SPAIN DATA: Manufacturing PMI Outperforms In August
- Spanish August manufacturing PMI firmer than expected at 54.3 (52.1 consensus, 51.9 July) in a very strong report. Key highlights: "Fastest growth of the manufacturing sector since last October [...] output, new orders and employment all rose to stronger degrees compared to July. Expectations were positive that growth will be sustained, although buying activity increased only slightly amid ongoing supply-side challenges"
- "Positive projections for growth also helped to support recruitment activity, with firms typically predicting a rise in output from
present levels in 12 months’ time. Confidence overall improved since July to a six-month high and was notably above the
survey’s long-term trend." - On prices: "Another modest increase in input prices was registered during August. Firms reported that inflation reflected
higher prices for foodstuffs and metals. Increased costs were passed on by manufacturers to clients wherever possible via a
rise in output charges. The rate of inflation was also modest despite rising to the highest level in five months."
