The market started the day on a weaker note, with equities extending the declines of yesterday as the US-China tensions continue escalating. President Trump has accused China to be behind a disinformation and propaganda attack on the US and Europe. In overnight macro data, US initial jobless claims decreased to 2.4mn from 2.7mn in the previous week, marginally in line with consensus. S&P 500 closed -1.27% on the day last night and futures continuing the slide, down 1% at the time of writing. In Asia weakness was more significant, as HKs Hang Seng index fell 5.7% after the Chinese government announced plans to impose national security legislation on the territory, while China’s CSI 300 fell 2.2%, as the NPC declined to set a GDP target for the first time. Oil was also pushed down with Brent trading at $34/b levels (-5.4%). Treasuries and Gold rallied with 10Y USTs 4bps tighter in yield @ 0.6347%.


In Europe DBRs 10Y is also down 2bps in yield from open in a sympathetic to Treasuries move, and risk of tone dominating across credit and periphery sovereigns, despite a decent reading in flash PMIs out of the UK (28.9 vs est. 25.7) & the Eurozone (30.5 vs. est. 27.0, prior 13.6). Yesterday marked the final day of the new BTPi Italia 5Y sale, bringing a total over 22bn to across Institutional and Retail investors, making it the biggest Italian issue ever.


In Mena, Egypt has successfully tapped the market with a 3-tranche deal, issuing a total of $5bn of bonds across 4Y, 12Y and 30Y tenors and leaving investors 20-50bps premia in the names, banking on the IMF $2.8bn aid approval that came through a day earlier and a risk on tone of the week. The bonds were heavily hit this morning, despite gathering a 5x over books, down 1-1.5pts from reoffer. EGYPT is out today on a holiday. The space in general is lower around 1-2pts today, after a remarkable performance of this week on the risk off tone and lower oil. KSA 60 trading down at high 111s from mid 113s, while Turkey 47 is down to 79 levels from 80s yesterday, despite the 50bps rate cut by CBT yesterday.


Latam bond markets had another strong trading day yesterday with oil names outperforming. PEMEX and PETBRA curves were up 2-4pts on average and ECOPET following with 1-2pts upward move. Mexico non-bank financials continued to be well bid with buyers looking for USD CREAL and UNIFIN, driving UNIFIN curve 4pts up at some point. Brazil also was bid, with corps and bank papers trading up 50c-1pt on average. Argentina extended the deadline for bondholder negotiations to June 2nd, despite the previous deadline of May 22nd marking the end of the 30-day grace period and hence an actual hard default. Argy Corps remained bid only however.


In Russian news, the White House has announced yesterday that the US will withdraw from the Open Skies Treaty with Russia, that permits unarmed aerial surveillance flights over dozens of participating countries. President Trump later said however that there was a “very good chance” the new agreement could be reached. The news seemingly left RUSSIA unaffected, with the curve trading in line with the rest of EM. RUSSIA 47 back down to mid-133 levels, after seen offered at 134.5 yesterday. UKRAIN 30 EUR is at mid-82 levels today, while KAZAKS as usual is outperforming on thin liquidity, KAZAKS 44 only down 20c to mid-124 levels.


In SSA, Reserve Bank of South Africa also lowered the key rate by 50bps to 3.65%, an all-time low; SOAF 49s is down 1pt to low 84 lvl however, in line with EM. In ANGOL buying continued, however offers were not as scarce as before with ANGOL 25 trading in low 68 area. The curve however is down a point today. NGERIA, IVYCST and GABON are also exhibiting a similar behaviour.