EM ASIA CREDIT: MNI EM Credit Market Wrap - Asia

The long end of the ASW spread curve continues to trade heavily, both in relative terms against Schatz and outright.

• Buxl ASW vs. 3-month Euribor registered a fresh cycle closing low on Friday, with increased free float and German issuance/fiscal risks continuing to weigh.
• These fundamental sources of pressure mean that relief episodes in long swap spreads remains contained, even when bonds manage to rally in outright trade.
• Meanwhile, repo/collateral dynamics have seemingly been binding in the front end of the ASW curve, preventing Schatz spread tightening towards ’24 lows.
• Still, J.P.Morgan go against the trend and recommend a tactical Bund swap spread paid position against the Schatz equivalent, given what they deem to be “attractive valuations.” They also suggest that their “2s/10s German cash bond curve flattening bias is also supportive of a steeper swap spread curve.”

• RES 4: $34.903 - High Oct 23 and the bull trigger  
• RES 3: $33.450 - 76.4% of the Oct 23 - Dec 19 ‘24 bear leg
• RES 2: $33.000 - Round number resistance   
• RES 1: $32.652 - High Feb 7                                 
• PRICE: $32.160 @ 08:11 GMT Feb 10   
• SUP 1: $30.814 - 50-day EMA        
• SUP 2: $29.704 - Low Jan 27 
• SUP 3: $28.748 - Low Dec 19 and bear trigger
• SUP 4: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle 

Silver traded higher last week. Key resistance at $32.338, the Dec 12 high, has been pierced. Clearance of this hurdle would highlight a stronger reversal and cancel a recent bearish theme. This would open the $33.00 handle and expose $33.450, a Fibonacci retracement. Initial firm support lies at $30.814, the 50-day EMA and a pivot level. A clear break of the EMA would reinstate the recent bearish theme.

• There's broader selling going through against the Yen, testing session low with the EUR, AUD, GBP and just short of the intraday low with the Dollar.
• Yields aren't moving, Risk on Tone could at play, although not seeing similar moves with the likes of the Swissy.
• The resistance in USDJPY is seen much further out, up to 152.89 High Jan 6.
• Gold continues to firm higher, now just $5 short of the $2,900.00 level, although most Desks will be eyeing the big Psychological $3000.00 level.
• In between these two levels, resistance is seen at $2917.5 - 1.764 proj of the Nov 14 - Dec 12 - 19 price swing, followed by $2962.2 - 2.00 proj of the Nov 14 - Dec 12 - 19 price swing.