EM ASIA CREDIT: MNI EM Credit Weekly
Jul-18 08:02
Our Global Emerging Markets Weekly…every Friday
Download here: https://mni.marketnews.com/4508vSj
EXECUTIVE SUMMARY:
- Tariff volatility subsided as potential deals inched forward, and earnings season kicked off. Issuance stayed low ($10bn), creating a stable backdrop in which EM $ index spreads were marginally tighter (-0.2bp).
- In our coverage, LATAM underperformed ($ Index +6.5bp), yet all regions are close to YTD tights. In ASIA, the outlier was Korea (+7bp). In CEEMEA, risk appetite supported another firm week for spreads.
- In ASIA, tariff talks continued to dominate, with Indonesia agreeing a 19% rate with the U.S. (vs threatened level of 32%). Vanke guided H1 losses higher YoY and Adani Ports finally launched its $ buybacks.
- In CEEMEA, earnings season focused on Qatar’s fins, where secondary spreads already reflect early confirmations of solid credit metrics. In addition, Senegal sovereign bonds recovered from the recent cash price lows.
- In LATAM, Argentinian President Milei’s budget restraint agenda was threatened by higher spending legislation, while pressure on Pemex mounted as suppliers both foreign and domestic demanded payment.
- In the week ahead, earnings season unlikely a spread driver and blackout period will curb supply— usually a technical tailwind—but likely harsher U.S. rhetoric around tariffs and possible push back of existing deals may see wider spreads.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
JGBS: Repacks Under Regulatory Scrutiny
Jun-18 07:52
BBG sources note that “Japan’s financial regulator plans to ramp up scrutiny of about $67 billion of high-yield loans backed by government bonds and other assets that have become popular among regional banks”.
- The story notes that a senior FSA official asked lenders to disclose the size and market value of the related holdings earlier today. The Agency will review the disclosures and could take further action if deemed necessary, per the sources.
- The ramp up in the use of these structured notes have generated some fear surrounding risk management and the potential for large losses.
- The piece highlights that holdings can be counted as loans for accounting purposes, despite them bundling together JGBs and derivatives in a bid to enhance returns.
- Buyers of the structures do not have to mark to market.
- Regulators previously pointed to deeper scrutiny of the products.
- Brokerages selling these products are also set to come under scrutiny, with MUFJ already ceasing the sale of structured loans, per the report.
RIKSBANK: Knee Jerk Weakness In SEK Fades; June Path Below 2.25% Through 2028
Jun-18 07:43
EURSEK saw a 0.2% knee-jerk higher following the Riksbank decision to a high of 11.0062, seemingly on the policy statement noting that "the forecast for the policy rate entails some probability of another cut this year". Although fading initially, the cross has since moved back towards the 11 handle at typing, now 0.3% higher on the session.
- The May 27 high at 10.9937 in EURSEK was pierced, but a clear break of this level is required to signal scope for a push towards 11.0850 (April 28 high).
- See below for an illustration of the new rate forecast. Notably, the rate projection does not return to the 2.25% level by the end of the projection horizon. This level is the mid-point of the Riksbank's 1.50-3.00% neutral range, and had previously acted as somewhat of an anchor for the rate path in the medium term.
- This adds to the dovish impetus stemming from today's decision.
EURIBOR OPTIONS: The Large Put Spread trades for more Today
Jun-18 07:38
- ERH6 98.5625/98.1875ps 1x2 sold at 10.75 down to 10.5 in 20k.
Yesterday:
- ERH6 98.5625/98.1875ps 1x2, sold at 11.25 down to 10.50 in 21.6k.
Trending Top
Jan-30 21:43
Jan-30 21:11
