It is EM Today

The US dollar is mixed but largely within ranges that have prevailed in recent sessions. The afterglow of yesterday’s Greek T-bill auction has faded and Greek bonds are lower, but the euro is holding above yesterday’s highs in the European morning, but does not appear to have the momentum to challenge the $1.3700 cap. Sterling is challenging yesterday’s highs, but it too does appear to have the momentum to challenge the week’s high just below $1.55. Cross rate pressure is weighing on the yen, allowing the greenback to extend its recovery off yesterday’s low near JPY92.60. A new high for the week was recorded in the European morning near JPY92.63, but there are thought to be plenty of offers in the JPY93.80-JPY94.40 band to effectively cap the upside.

Intel’s better than expected earnings, alongside favorable regional developments helped lift Asian equities with the MSCI Asia-Pacific Index rising 07%. Singapore’s spectacular Q1 GDP (32.1% quarterly annualized pace compared a consensus of around 18.5%) and the tightening of policy signaled by an adjustment to its currency basket helped lift the local stock market 1.6%, the regional leader. The Strait Times Index is above 3000 for the first time since mid-2008. South Korea saw a large drop in unemployment (3.8% in March from 4.4% in Feb) and helped lift the Kospi 1.45%. Note that Thursday China begins trading a futures contract on the CSI 300. European bourses are around 0.5% higher. As in Asia, semiconductors and technology more broadly are best performers today, but gains are broad based and no sector represented by the Dow Jones Stoxx 600 is lower near midday in Europe.

Benchmark 10-year sovereign yields are generally 1-2 basis points higher. There was European supply today and the reception seems tepid. The 5-year note in Italy was covered 1.35 times. This initially weighed on Italian bonds. The Portuguese auction showed a clear preference for shorter dated paper. The two-year was oversubscribed 2.5x and the 10-year a weaker 1.6 times and these results also saw Portuguese bonds extend their earlier loss. But the problems are not confined to the weaker credits. Germany sold a 5-year bond today and the bid-cover was 1.5 compared with 1.9 last month and despite its slightly higher yield (6 bp). Moreover, the Bundesbank appeared to retain a relatively large amount (1.2 bln euros compared with 985 mln euros last month). Lastly, Moody’s upgraded South Korea’s bond rating to A2 from A1.