EM ASIA CREDIT: Possible US-India trade deal in the works

There is a lot of discussion going on with regards to the merits of Trump's H-1B visa fee, initially seen as a negative due to it reducing cheap access to many of the software engineers being brought in from both India and Asia. There are some who see it as something that has needed to be addressed for quite some time and see benefits to the US tax payer as a result. There was some early focus today on its impact on US equity futures. We are lower but only marginally, with Nasdaq and Eminis off by around 0.1% at this stage. Below are a compilation of excerpts that touch on the issue:

• Michael W. Green on Substack: “The current system creates market distortions that hurt American workers, mislead policymakers, and ironically harm the very immigrants it claims to help.”
• “A $100,000 H-1B fee is not about closing doors. It is about aligning costs, restoring price discovery, and ensuring immigration serves the national interest. With segmentation, reverse Dutch auctions, and reinvestment of proceeds, the system could raise wages, ease housing stress, strengthen education, and renew cooperation between firms and schools.”
• Reed Hastings(Co-Founder of Netflix, CEO Powder) on X: “I've worked on H1-B politics for 30 years.  Trump's $100k per year tax is a great solution.  It will mean H1-B is used just for very high value jobs, which will mean no lottery needed, and more certainty for those jobs.”
• Bloomberg - “Trump’s $100,000 H-1B visa is a big gamble on US jobs, Patricia Lopez writes. While it tilts the playing field toward American workers, answering critics who complain that companies are addicted to hiring cheaper foreign labor, the prevailing-wage rules may be prohibitive enough to tank the whole program.”

The S&P(ESZ5) overnight range was 6679.50 - 6731.50, SPX closed +0.49%, Asia is currently trading around 6718. Another day and another all-time high, nothing stops this train. This morning US futures opened slightly lower, E-minis(S&P) -0.15%, NQZ5 -0.15%. The stock market continues to look way overdone and is in what is supposed to be a difficult seasonal period. Yet it remains in an uptrend and continues to confound the bears by making new all-time highs and there does not look to be any imminent signs of a correction yet, dragging an underweight institutional market back in. 

• Bloomberg - "Trump’s $100,000 H-1B visa is a big gamble on US jobs, Patricia Lopez writes. While it tilts the playing field toward American workers, answering critics who complain that companies are addicted to hiring cheaper foreign labor, the prevailing-wage rules may be prohibitive enough to tank the whole program."
• Lance Roberts on X: "Despite the function of time...the amount of liquidity still in the system following the 2020 splurge is still very elevated which is why retail spending continues to hold up despite signs of economic constraints.” 
• ISABELNET on X: "S&P 500 - The Fed cutting interest rates while stocks are at record highs and the economy is still growing creates a bullish setup for equities, boosting investor optimism about future returns.”
• Barchart on X: “Only one other time in history has the Federal Reserve cut rates without falling earnings. That led to the Dot Com Bubble." See Graph Below.

Fig 1: S&P EPS vs Fed Funds Rate

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

In Tokyo morning trade, JGB futures are weaker and at session lows, -9 compared to settlement levels, after unwinding Friday’s overnight gains.

• (Bloomberg)  “Japanese traders are starting to price for an October BOJ rate hike, which will be a support for this week’s 40-year auction as investors see steps being taken toward tackling Japan’s sticky inflation. Meanwhile, upward pressure on yields will prevail in the two-to-five year sector, nudging the yield curve flatter.”
• MNI BOJ WATCH: Ueda Says Rate Hikes Will Come; No Timing Hints. Bank of Japan Governor Kazuo Ueda insisted that rate hikes remain in prospect but provided no further hints as to timing on Friday after the BOJ voted to keep the policy rate unchanged at 0.5% with two dissenters calling for a 25-basis-point hike.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after Friday’s modest sell-off.
• Cash JGBs are slightly weaker across benchmarks, led by the futures-linked 7-year (+2.1bps). The benchmark 10-year yield is 0.5bp higher at 1.650% versus the cycle high of 1.653% set on Friday.
• Swap rates are 1-2bps higher. Swap spreads are mostly wider.