INTERNATIONAL TRADE: Vietnam and Taiwan Exports To US Continue To Grow Strongly
Vietnamese and Taiwanese exports to the US continued to exhibit strength in June, with Chinese transshipments and tariff front-running seemingly remaining prevalent. With Eurozone and US trade data only (or in some cases, not even) updated for May, the Asian data provides a more timely indicator of global goods trade flows.
- Vietnamese exports to the US have risen more than 30% Y/Y in each month since February 2025. Meanwhile, Taiwanese exports averaged 45% Y/Y between February and April, before jumping to 87% Y/Y in May and 91% Y/Y in June.
- Vietnamese import growth from China has averaged 35% Y/Y between February and June, above the 30% Y/Y averaged through 2024. In Taiwan, 24% Y/Y average growth since February contrasts with a 13% Y/Y average in 2024.
- The US and Vietnam agreed on a trade deal last week. Vietnamese exports will be subject to a 20% tariff rate, with any goods deemed to be transshipments (i.e. from China) facing a 40% levy. A reminder that Vietnam was faced with a 46% reciprocal tariff rate following the original April 2 Liberation Day announcement.
- Focus in the next few months will be on whether the Vietnamese trade deficit with China narrows as a result of this agreement, or if current trends extend (which could be interpreted as Asian exporters calling the US’ bluff in being able to accurately identify transshipments).
- While there were fairly benign developments in Vietnamese net trade with the EU in June (proxied by the five largest EU economies), the Taiwanese trade deficit with the EU widened to USD1.7bln from USD0.4bln in May. This was due to a USD0.5bln rise in Taiwanese imports from both Germany and the Netherlands – the latter likely a function of ASML’s activities in the country.
- Chinese trade data for June is due next Monday (14th July), which will give an update on direct exports to the US, and whether tariff-related disinflationary trade diversion to the Euro area is being realised.
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JGB TECHS: (M5) Rallies Off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.19 @ 15:53 GMT Jun 06
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
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- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
