EM ASIA CREDIT: MNI EM Credit Market Wrap - Asia
** The main stories out of the region**
We started in Asia with Treasuries at the highs, more or less back to Wednesday's pre-CPI level, and then traded lower into the Asia close (10yr yields +1bp). In terms of Asia emerging markets, we saw some retracement of yesterday's move wider with markets buoyed by a U.S. delay to implement reciprocal tariffs until early April. Asia benchmark govie/agency bond spreads were 1-2bp better on the day.
In terms of newsflow, Nissan stated it had not yet had management level talks with Hon Hai. We didn’t think this was particularly surprising given the Honda deal had only recently collapsed, and the initial talks are probably with Nissan stake holder, Renault. In China tech, Apple confirmed it was also collaborating with Baidu as well as Alibaba, positive for sentiment, but expect it's a low margin business. Finally, Indian aluminium company, Hindalco Industries, reported a good set of Q3 results that were positive for spreads.
In terms of supply, no new deals announced today, but we did make fair value assessments on Mirae ($ 3y mandate). We also estimated where Indonesian electricity utility PLNIJ might come in various dollar maturities.
Best & Worst Performers (zsprd, bp)
Source: Bloomberg
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EGBS: /SWAPS: Commerzbank Remain Short Long End German & French ASWs
Commerzbank note that “repo specialness continues to erode out of year-end, but exclusively due to the rich, seasoned Bunds. Recent issues and GC remain floored around depo, suggesting that the collateral floor continues to hold.”
- “Swap spreads stay tense as the renewed pressure on (ultra-)longs offsets the collateral-driven resilience in Schatz-spreads. As fiscal fears continue to dominate, U.S. Tsy and Gilt spread-structures signal further downside even if the collateral floor remains in place. We therefore stay short (ultra-)long Bund ASW spreads outright and vs. the curve, as well as 30y OAT spreads.”
- “As the specialness differential between seasoned, low-free-float Bunds and high-free-float ones continues to compress we see value in switching out of seasoned, rich DBRs into the active peers. EGB-spreads should continue to consolidate as fiscal fears stays in focus.”
EUROPEAN INFLATION: French CPI Inflation Momentum Rebounded In December
French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at 1.32% Y/Y.
- Core CPI softened to 1.3% Y/Y (from 1.5% in November).
- Services was revised down 1 tenth from flash to 2.2% Y/Y (2.3% in Nov) while core services also softened to 2.6% (vs 2.8% in Nov - there is no flash for this series). The slowdown in services was in part due to prices of communication services falling 14.7% (vs -12.2% prior).
- The broad "manufactured products" component was unrevised from the flash print at -0.4% Y/Y (vs -0.3% prior). Core manufactured products fell at a steeper rate 0.4% Y/Y (from -0.2% in Nov).
- The softening in services and manufactured products is offset by energy rebounding between November and December; it was unrevised from flash at 1.2% Y/Y (vs -0.7% in Nov).
- INSEE's seasonally adjusted CPI series highlights momentum rebounding after having eased for the previous few months. CPI rose 0.4% M/M seasonally adjusted (SA), after a flat reading in November. The 3m/3m SA annualised rate rose 0.18% in December (vs a fall of 0.71 in Nov), and the 3m annualised rate rose a solid 2.63% (from -1.45% in November) - the firmest since August 2024.
- There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in December (34% vs 35% prior), with the proportion of components with annual inflation rates above 6% also falling marginally to 10% from 11% in November.
EQUITIES: Big names are reporting Today
US Earnings kicks off today, big names are reporting all pre Markets, notable ones:
- Pre Markets: Blackrock, BoNY, Citi, GS, JPM, Wells.
