ASIA

Asian stock markets were in the green today, heading for their biggest 2 day gain since June on the back of the development in the US-China trade talks. The countries are finally set to meet, Chinese trade officials will travel to Washington in early October for talks. China’s CSI rose 1.7%, also supported by the news of the preparation of the new stimulus measures to the economy by Beijing. Japan’s Topix was the outperformer, rising 2.1%, while Hong Kong’s Hang Seng index is seen erasing it’s gains from yesterday, down -0.96% today, after showing an impressive 3.9% gain on Wednesday, as the positive news of the HK government plan to withdraw a controversial extradition bill failed to deter the protesters from continuing riots.

UNITED STATES

The positive US-China talks news led to a small sell-off in Treasuries, with the 10Y yield up to as high as 1.52% this morning from 1.45% lows of yesterday, and gold -0.5%, with the easing of geopolitical tensions reducing the expectations of dovish FED decisions later this month.

UNITED KINGDOM

In the UK, the news momentum continues to be positive, where PM Boris Johnson suffered 2 more defeats yesterday, with the House of Commons not only managing to pass a bill which would force Boris to either seek a deal or ask for an extension from the European Union until January 2020, but also rejected the PM’s call for an early general election on October 15th. The pound soared the most in six months, trading at $1.225 this morning from below $1.21 level yesterday morning. However, for the former bill to become a law, it needs first to be passed in the House of Lords, which is expected to happen by the end of the week.

EUROPEAN UNION

The EU core yields rose last night, with the curves steepening, as French ECB’s VIlleroy de Galhau, followed German and Dutch ECB policymakers with doubts over the need of restart of the QE, as well as on the back of the easing in gepolitical tensions across the globe. German bund led the sell-off with the 10Y DBR yield up 10bps to -0.64%. The Italian BTPS were an exception with the bonds spread tightening to the German bund as PM Conte won backing to form a new government with veteran European lawmaker Roberto Gualtieri as finance minister. BTPS 49s traded up as high as 145.7 lvls yesterday.

LATAM

In Latam news, Moody’s held an event in Mexico today, where the analysts said that the govt will probably miss the primary surplus target this year, called PEMEX to still be the main risk to Sovereign A3 rating and the need of $7bn investment more into the company this year. The news hasn’t deterred the demand from the sovereign credit and high-quality names, with MEX 48s gaining half a point and a small demand seen even in the higher beta but decent names such as UNIFIN. The new BIMBOA 49s bond was strongly bid yesterday, with the bond seen trading more than 75c above the reoffer price. In Argentina sovereign bonds the tone also felt better, with the bonds benefiting from the global risk-on tone. ARGENT 2117 closed up 2pt at low 41 lvls and ARGENT 21s up 3pts at low 45 lvls.

RUSSIA

In Russia, RUB also benefited from the easing of uncertainty, strengthening 0.9% yesterday to 66.2 lvl vs the USD and the local OFZ auction again posting impressive results with the RUB 20bn RFLB 39s auction drawing a highest since June RUB 61bn demand. The Head of MinFin’s Govt Debt Department announcement in the interview with Reuters yesterday of their intention of keeping the OFZ supply limited until the end of year undoubtedly helping with the auction’s success. IN the Eurobonds space RUSSIA 29s and 35s outperformed the rest of the curve, down another 6-5bps in yield, KAZAK sovs traded down 4bps in yield on average while UKRAIN continued to outperform the CEE space with the curve shifting 15-20bps lower in yield on the day.