EM ASIA CREDIT: MNI EM Credit Market Update - Asia
Asia Emerging Markets USD sovereign and agency spreads are trading in a narrow range this morning (+/- 1bp), in what is a relatively quiet session. 10-year US treasury yields are around 3bp lower at 3.95%, the lowest since April. Equities are mostly lower, the Hang Seng is down 1%, with no new progress in China-US relations. In primary, Momentive Performance Materials, guaranteed by Kookmin Bank, priced its 3Y deal overnight close to our fair value estimate at T+75bp. In terms of newflow, China looks to increase scrutiny of food delivery companies, notably around food safety.
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JGBS: Slightly Cheaper Ahead Of 20Y Auction Results
At the Tokyo lunch break, JGB futures are slightly stronger, +2 compared to the settlement levels.
- Cash US tsys are little changed in today's Asia-Pac session after yesterday's modest rally
- Cash JGBs are flat to 1bp cheaper across benchmarks. The benchmark 20-year yield is 0.5bp higher at 2.671% ahead of today's supply.
- Last month’s 20-year JGB auction showed 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.
- 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.
- Swap rates are flat to 1bp higher. Swap spreads are mixed.
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 19 August 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 similar valuation to last month in terms of the 10/20/30 butterfly.
- On the other hand, the auction comes amid an 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.
JGBS AUCTION: PREVIEW - 20-Year JGB Auction Due
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 19 August 2025, the auction drew cover of 3.0853x at an average yield of 2.581%, an average price of 98.93, a high yield of 2.591%, a low price of 98.80, with 65.3666% of bids allotted at the high yield.
- Last month’s 20-year JGB auction showed 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.
- Today’s auction also comes on the heels of lacklustre demand metrics observed in this month’s 30-year JGB auctions. The cover ratio dipped to 3.31x from 3.4297x and the auction tail lengthened to 0.18 from 0.15, indicating a weakening in bidding strength.
- Results are due at 0435 BST / 1235 JT.
