EM ASIA CREDIT: MNI EM Credit Market Wrap - Asia
10y U.S. Treasuries yields end up being 2.5bp tighter in Asia, with yields currently at 4.3%. This follows overnight news that President Trump was rebasing tariffs, for most countries, to 10% for 90 days. In contrast, China tariffs were ultimately raised to 125% on the back of China's own reciprocal tariffs on the U.S. China is meeting today in an adhoc meeting to discuss new ways to boost the economy.
There are no guarantees that tariffs will stay unchanged for 90 days and it's worth noting that if this indeed a trade war, that all parties have agency. China's actions with regards to U.S. trade or domestic consumption will be key.
Asia EM govie/agency bond spreads are up to 21bp tighter on the back of the pause, with Philippines (-21bp) and Indonesia (-16bp) the outperformers. Asian equities are also higher, with South Korea's Kospi +6.6%, Indonesia JCI +5.1% and the Hang Seng +2.4%.
In terms of newsflow, State backed Shandong Hi-Speed Group Co. (SDHG) is coming to the market with a $ benchmark deal, we see fair value at 4.8% versus IPT of 5.2% area. There is also unconfirmed talk of a possible sale of Axiata's tower business for $3bn, but for now there are no financial details.
Best & Worst Performers (zsprd, bp)
Source: Bloomberg
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STIR: Still Less Than 60bp OF BoE Cuts Priced Through Year-End
GBP STIRs seemingly reacting to the overnight bid in Tsys as opposed to the downtick in Bunds, resulting in modest dovish moves.
- BoE-dated OIS flat to 2bp more dovish across ’25 meetings.
- 58.5bp cuts priced through year-end, with ~80% odds of a cut priced through May and ~26.5bp showing through June, sticking to multi-week ranges.
- We still look for a cut in May.
- SONIA futures flat to +2.5.
- We have entered the MPC’s quiet period ahead of next week’s monetary policy decision.
- An unchanged Bank Rate is almost universally expected here (pricing covering the event has tended to 0bp in recent weeks).
- Deputy Governor Ramsden’s speech on Friday 28 February (in which he sounded less dovish but not completely ruling out a sequential rate cut vote) and last week’s TSC hearing (in which Governor Bailey sounded no closer to voting for a sequential cut) have left the arithmetic pointing firmly in favour of a hold next week.
- Little of note on the UK calendar today.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.455 | +0.0 |
May-25 | 4.263 | -19.2 |
Jun-25 | 4.191 | -26.4 |
Aug-25 | 4.051 | -40.4 |
Sep-25 | 4.001 | -45.4 |
Nov-25 | 3.902 | -55.3 |
Dec-25 | 3.870 | -58.5 |
EURJPY TECHS: Short-Term Reversal
- RES 4: 164.08 High Jan 24 and a key resistance
- RES 3: 162.70 High Jan 28
- RES 2: 161.80 High Jan 30
- RES 1: 161.28 High Mar6
- PRICE: 159.94 @ 07:34 GMT Mar 11
- SUP 1: 158.65 20-day EMA
- SUP 2: 155.60 Low Mar 4
- SUP 3: 154.80 Low Feb 28 and a bear trigger
- SUP 4: 154.42 Low Aug 5 ‘24 and key medium-term support
EURJPY is holding on to its recent gains. Last week’s rally undermines a recent bearish threat and instead highlights a potential reversal. The cross has pierced resistance at 161.19, the Feb 13 high. A clear break of the hurdle would strengthen a bullish condition. Initial support to watch is 158.65, the 20-day EMA. Key support has been defined at 154.80, the Feb 28 low.
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