EM ASIA CREDIT: TSMC: AMD sees higher US costs

The Japanese Ministry of Finance (MoF) will today sell Y1.0tn of 20-Year JGBs. The MoF last sold 20-year debt on 20 May 2025, the auction drew cover of  2.5007x at an average yield of 2.453%, an average price of 99.29, a high yield of 2.540%, a low price of 98.15, with 80.8791% of bids allotted at the high yield.

• Today’s 20-year JGB auction follows very poor results across key metrics at last month’s auction. The low price underperformed dealer forecasts, according to a Bloomberg poll. Moreover, the cover ratio decreased to 2.5007x from 2.9639x in the prior auction and the auction tail lengthened dramatically from 0.34 to 1.14 – the longest since 1987.
• It also comes on the heels of poor demand metrics observed in this month’s 30-year JGB auctions. The low price fell short of dealer expectations, per the Bloomberg survey. Moreover, the cover ratio fell to 2.9215x from 3.0739x, and the auction tail lengthened significantly to 0.49 from 0.30, both indicating a marked deterioration in bidding strength.
• Results are due at 0435 BST / 1235 JT.

ACGBs (YM +3.0 & XM +4.5) are trading stronger, but ranges have been relatively narrow on a data-light day.

• May CPI data is due tomorrow. Consensus expects it to ease to 2.3% y/y from 2.4%. Trimmed mean ticked up to 2.8% y/y in April and has been around 2.7-2.8% since December, suggesting a stalling in disinflation. The next RBA meeting is July 7-8.
• Cash US tsys are little changed, with a mild steepening bias, in today’s Asia-Pac session after yesterday’s modest gains.
• “Australia faces a "guns or butter" choice between increasing its defence budget and expanding social programs, with the government currently opting for the latter.” (BBG)
• Cash ACGBs are 3-4bps richer with the AU-US 10-year yield differential at -17bps.
• The bills strip is -1 to +3, with late whites/early reds outperforming.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given an 85% probability, with a cumulative 76bps of easing priced by year-end (based on an effective cash rate of 3.84%). 

China’s Iranian oil imports have avoided disruption so far, despite the ongoing conflict, according to Du Bingqin, an energy analyst at Everbright Futures, noting that tighter U.S. sanctions could strain Chinese refiners, especially smaller ones. Notably, Kpler data estimated China's onshore crude stockpiles have reached at least 1.13 billion barrels, a record high and equivalent to 74 days of usage. Iran represents a small part of China’s overall foreign trade, with exports and imports accounting for 0.19% and 0.22% of the total between January and May. (Source: Yicai)