EM ASIA CREDIT: Philippines (PHILIP): Outlook downgrade

China’s 10-year treasury bond yield may be pushed above 1.8% in the near-term, due to greater-than-expected PPI improvements amid rising oil prices, said Ming Ming, chief economist of CITIC Securities. PPI may see a steeper upward slope, likely to rise to 0.6% y/y for the whole year considering the potential oil price increases and the impact of “anti-involutionary” campaigns on some industrial product prices, said Ming, after February PPI recovered more than expected to -0.9%. However, long-term risks in the bond market may be relatively controllable as PPI-to-CPI transmission could be weakened by insufficient domestic demand, Ming added. (Source: Yicai.com)

Chinese assets have shown strong resilience in the face of geopolitical shocks in the near-term, with relatively small volatility in the A-share market, Securities Times reported. Hong Kong's stock market also performed relatively strongly, with southbound capital making a net purchase of about HKD37.2 billion on Monday, setting a new record for the highest single-day net transaction, the newspaper said. In the mid- to long-term, the A-share market as a whole is expected to maintain a fluctuating upward trend, with the risk-free rate continuing to decline and capital market reforms deepening, the newspaper said citing Yang Delong, chief economist of Qianhai Open Source Fund.

• China's bonds are trying to post a modest recovery Tuesday after the largest drop of the year Monday.  The 10-Yr is up +.025 to 108.335, having fallen -0.235 yesterday.  
• The 2-Yr is up +.016 to 102.47 having fallen -0.052 yesterday.  
• Cash is also marginally better with the 10-Yr CGB back at 1.80 having closed at 1.814% yesterday.  
• Markets await any policy response from the NPC.  The government has lowered its 2026 GDP growth target to 4.5%–5%, down from "around 5%" in previous years, signalling a shift toward "high-quality" growth over raw speed.  Finance Minister Lan Fo'an indicated that fiscal expenditure and new government bond issuance will reach record highs this year.  The headline budget deficit target is set at 4% of GDP, consistent with 2025 levels, to provide stable macroeconomic support.
• The PBoC is expected to implement incremental rate cuts and reductions in the Reserve Requirement Ratio (RRR) to maintain ample liquidity for a "strong start" to the new Five-Year Plan.
• Forecasts are for a 50bps cut which would add CNY1tn of liquidity to the interbank system and help support bond yields.