Asia credit starts to wobble as market pain spreads
Summary
Asia Itraxx CDS spreads widen by 26 bps
Sovereign CDS in Asia widen
US IG credit spreads + 20bps since April 2
SINGAPORE, April 7 (Reuters) - Credit markets turned shaky in Asia on Monday, with the cost of insuring against corporate and sovereign default higher as recession fears rippled across financial markets.
The five-year credit default swap spread on the Markit Itraxx Asia ex-Japan index, comprising sovereign and company debt, rose about 26 basis points to its highest since August last year, according to S&P Global data.
Sovereign spreads for China, Vietnam, Indonesia, Thailand and Malaysia also widened, S&P Global data showed.
Unusually the pressure on credit has followed, rather than led, a tailspin in world stock markets as U.S. President Donald Trump declared a trade war in earnest by levying the highest tariffs on U.S. imports in over a century.
U.S. equity futures were down nearly 4% by mid-session in Asia and selling in credit came as equity markets from Hong Kong to Sydney were crumbling.
"It's not just the equity market. We've seen credit spreads gap wider materially and we're also hearing various fund flows going the other way as well, as people try to get into cash or other commodities," said Simon Ward, head of debt capital markets for Australasia at Mizuho in Sydney.
He said the debt market would probably enter a "wait and see" mode, with deals on pause as volatility has spiked.
The spread or difference in yield between U.S. Treasuries and the Ice BOFA index of U.S. investment grade debt (.MERC0A0), opens new tab has widened about 20 basis points since Trump's tariff announcements and for high-yield U.S. debt (.MERH0A0), opens new tab it has widened about 96 bps.MERH0A0> it has widened about 96 bps.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
26 minutes ago
- Reuters
Exclusive: Pernod Ricard launches restructuring plan as spirits sales slide
PARIS/LONDON, June 18 (Reuters) - Pernod Ricard ( opens new tab is streamlining its business by grouping brands into two main divisions, according to internal presentation slides seen by Reuters on Wednesday, as European spirits makers grapple with a downturn in sales. The French spirits maker told Reuters it had announced an "internal project to create a more agile and simplified organisation". "These changes imply the launch of local consultation processes with our social partners and employees where necessary," Pernod Ricard said. It did not comment on the number of jobs affected or the plan to group brands into two units.
Coin Geek
an hour ago
- Coin Geek
Senate approves GENIUS bill, but House uncertainty awaits
Getting your Trinity Audio player ready... The United States Senate has made history by approving stablecoin legislation, a first for Congress, but uncertainty awaits the bill in the House of Representatives. On June 17, the Senate voted 68-30 in favor of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, marking the first time that the upper chamber of Congress has passed a bill governing digital assets and the first time either chamber has approved legislation governing stablecoins. The House passed a digital asset market structure bill (FIT21) last year that the Senate failed to take up before Congress adjourned for the 2024 elections. Tuesday's margin of victory was identical to last week's cloture vote, with 18 Democrats voting 'aye.' The ever-expanding list of questionable crypto ventures linked to President Donald Trump and his family—including the launch of their own stablecoin (USD1) this spring—proved incapable of dissuading pro-crypto Dems from supporting the bill. GENIUS was supported by all but two Republicans. Sen. Josh Hawley (R-MO) opposed GENIUS because it allows private corporations to issue their own stablecoins. Hawley called this 'a huge giveaway to Big Tech' and filed an amendment to limit tech firms' stablecoin activities. But he said the language was 'gutted' in the final GENIUS text, leaving only 'window dressing' where concrete restrictions were intended. GOP leadership refused to consider other amendments, disappointing those who'd been promised an open amendment process by Senate Majority Leader John Thune (R-SD). Some GENIUS critics sought additional language to limit Trump's ability to profit off a financial sector over which he has direct control, while other critics wanted stricter rules governing foreign-based stablecoin issuers like Tether (USDT). Sen. Mark Warner (D-VA), who helped steer GENIUS to the finish line, said the bill's 'long and winding journey … would have been much easier if the Trump family wasn't so grossly involved in this emerging sector.' As for what tipped other Dems into the 'aye' camp, well, more on that at the bottom of this article. One of the prime beneficiaries of GENIUS will be the U.S.-based Circle (NASDAQ: CRCL), the issuer of the USDC stablecoin, which is second only to Tether in terms of stablecoin market cap. Circle made its Nasdaq debut less than two weeks ago and the stock closed Tuesday down 1.3%, but news of GENIUS's passage produced a nearly 3% bump in after-hours trading. Tether has previously mused about launching a new U.S.-compliant stablecoin that would limit unwanted regulatory scrutiny on USDT, including subjecting its reserves to a third-party audit. While Circle execs tweeted effusive praise for the Senate on Tuesday, Tether CEO Paolo Ardoino has so far tweeted only the word 'GENIUS' alongside some America-themed emojis and a brain. U.S. Treasury Secretary Scott Bessent issued a celebratory tweet ahead of the GENIUS vote, claiming that the bill's success could boost the overall stablecoin market to $3.7 trillion by the end of the decade. That's nearly twice the $2 trillion market that Bessent predicted during a Senate hearing last week. Either figure would be a significant boost to the current cap of just $261.5 billion. House v Senate for all the crypto marbles All eyes now turn to the House of Representatives, where GENIUS may get a slightly cooler reception than Senate Republicans might prefer. Politico reported that GOP leadership in both the House and Senate are of two minds when it comes to how best to proceed. The House reportedly favors combining stablecoin legislation with a comprehensive market structure bill like the House's Digital Asset Market Clarity (CLARITY) Act, which has already cleared multiple markup sessions. The Senate has yet to introduce its own market structure bill and leadership would prefer getting a conference committee to quickly negotiate the differences between GENIUS and the House's STABLE Act, which met with approval from the Financial Services Committee (FSC) but has yet to hit the House floor. The Senate reportedly wants a quick 'win' on stablecoins to distract from its squabbles with the House over Trump's 'big, beautiful' spending bill. House crypto boosters like Warren Davidson (R-OH) told Politico the Senate 'clearly doesn't… have the consensus built to deal with market structure.' Davidson favors bundling stablecoins, market structure and a ban on central bank digital currencies (CBDC) into a single bill that the House can send the Senate. As FSC Chair French Hill (R-AR) told Fox Business last week: 'Both these bills are very, very important to the goal of a digital asset for the future of the U.S. You can't just pass a stablecoin bill and have any place to effectively use it. You need the CLARITY Act to give us that market framework.' Sen. Bill Hagerty (R-TN), the driving force behind GENIUS, warned that if his stablecoin bill was modified by the House to include market structure language (and whatever else), 'it would have to come back to the Senate for a lot of work.' The House breaks for the summer in the last week of July, while the Senate's last day is August 1. That makes a tight timeline for both chambers to coalesce around a strategy, harmonize bill language, and get something to the president's desk for signing by Labor Day. Back to the top ↑ CFTC chairman or lighthouse keeper? CLARITY would hand the bulk of crypto oversight to the Commodity Futures Trading Commission (CFTC), with a far smaller role for the Securities and Exchange Commission (SEC). But questions remain as to whether the chronically understaffed and underfunded CFTC is up to the task. Brian Quintenz, Trump's nominee to lead the CFTC, has yet to be confirmed by the Senate, but once he is, he'll find only half the usual number of commissioners to help oversee all things crypto (and the two that remain aren't sticking around). That one-man-show could continue should the president not bother to fill those four empty commissioner seats, prioritizing 'efficiency' over consensus building. Trump has long disdained the norms of seeking Congressional approval of key agency appointments, often using the 'acting' designation to sidestep longstanding advise & consent protocols, appointing new 'acting' execs when the original appointee's grace period expires. A new Bloomberg article notes that there's nothing that legally compels Trump to fill the empty chairs anytime soon, which would empower Quintenz to make unilateral decisions on everything from regulatory matters to signing CFTC office leases, as well as dealing with letters from aggrieved stakeholders. Back to the top ↑ Gemini seeks, er, something from CFTC Speaking of angry missives, the CFTC just received a nasty letter from attorneys representing brothers Cameron and Tyler Winklevoss and their Gemini exchange. The letter takes issues with the conduct of lawyers representing the agency's Division of Enforcement (DOE) for bringing 'dubious false statements charges' against Gemini. By way of background, in January, Gemini reached a $5 million settlement with the CFTC regarding the 2022 civil complaint accusing Gemini of 'making false or misleading statements of material facts' regarding a BTC-based exchange-traded product (ETP). The complaint accused two unspecified individuals—who may or may not have been the Winklevii—of loaning 'thousands' of BTC at artificially low rates to market-makers to ensure the ETP's trading volume met CFTC standards. Gemini's letter accused DOE staff of having 'selectively and unfairly weaponized the Commodity Exchange Act' against the company. Gemini claims the DOE's original sin was taking seriously 'a false whistleblower report' filed by its former chief operating officer Benjamin Small. Gemini claims Small was fired for hiding the existence of 'a multi-million dollar rebate fraud perpetrated by two Gemini Trust customers.' Following his dismissal, Small allegedly vowed to 'destroy' Gemini and filed the report that Gemini claims convinced the CFTC to launch a probe into the exchange's operations in 2018. The company's letter to CFTC Inspector General Christopher Skinner doesn't ask the regulator to do much, except to act on reforms proposed last month by soon-to-be-ex-commissioner Caroline Pham (who is serving as acting chairman while Quintenz warms the bench). Other than that, the letter is simply a list of grievances detailing how unfairly Gemini feels it was treated at the CFTC's hands. It's possible that Gemini might be seeking to claw back some or all of that $5 million settlement, taking advantage of the 180° attitude shift towards digital assets by federal agencies since Trump took his oath of office in January. If that's the case, Gemini could be taking their cue from Ripple Labs, which last August was ordered to pay the SEC $125 million for violating securities laws. Since Trump's election, Ripple has teamed up with the SEC's new management to press the judge to return $75 million of that sum to Ripple. (The SEC dropped its civil complaint against Gemini in February.) While the climate for crypto operators has indeed undergone a sea change at the federal level, it's perhaps notable that Gemini has yet to file a similar complaint with the New York Attorney General's office, which in June 2024 fined Gemini $50 million for defrauding investors of the Gemini Earn program. But New York Attorney General (NYAG) Letitia James isn't Trump's biggest fan, and she doesn't appear to feel any need to apologize to crypto operators who fail to color within the lines. Back to the top ↑ Fearing crypto cash, Dems go with the flow On June 16, The Lever reported on a private group chat on the encrypted Signal messaging platform featuring Democratic Party operatives and crypto lobbyists. The chats expose the naked self-interest behind some Dems' positions on crypto legislation like GENIUS, as many Dems see Trump's self-interested dealings all too clearly but calculate that publicly opposing the well-funded crypto sector will kill their electability. The 'Dem Crypto Policy Roundtable' chat group reportedly includes Capitol Hill staff, Democratic National Committee members, lobbyists, venture capitalists (including Paradigm and Electric Capital reps), and lawyers for major crypto firms. The chats reportedly discussed various crypto bills, including GENIUS and CLARITY. The Crypto Council for Innovation's Sheila Warren is quoted saying 'Trump's corruption is manifesting dramatically in crypto,' and advising 'ordinary' Dems running in the 2026 midterm elections to 'stay away from crypto apart from being vaguely supportive.' Dems on committees were given the option to 'flag the corruption and be a pro-crypto anti-corruption candidate.' Crypto lawyer Jason Gottlieb suggested it was pointless for Dem senators to performatively file anti-corruption amendments to GENIUS, saying such efforts 'will be doa [dead on arrival].' Gottlieb reasoned that '[n]obody is going to get primaried because they voted for GENIUS.' Gottlieb said if Dems want to win the next election they 'can not [sic] afford to alienate a very vocal and wealthy group of donors.' Electric Capital managing partner Avichal Garg put a finer point on it, saying if Dems didn't vote for GENIUS 'they will get 0 dollars going forward. It would be political suicide for them not to support it.' The crypto sector is clearly adopting a stick-and-carrot approach, as Bloomberg reported Tuesday on the number of Dem-adjacent individuals and companies being hired to advance crypto's cause. This includes Coinbase (NASDAQ: COIN) adding Kamala Harris campaign advisor David Plouffe to its Global Advisory Council last week, Tether hiring a lobbying firm run by former staffers to President Joe Biden, and venture capital giants Andreessen Horowitz hiring former Dem staffer Michael Reed as its new government affairs partner. Bloomberg quoted NYU adjunct professor Austin Campbell (also CEO of digital payment platform WSPN) saying the hires were a reflection of crypto's understanding that the Dems might not always be in the minority. 'If you made this industry explicitly partisan, boy do you have a problem.' Incidentally, Campbell was also in the Signal group chat, where he said opposing GENIUS would make voters see Dems as 'pro-bank.' Campbell also warned that calling out Trump's crypto corruption only makes him 'stronger, not weaker.' Faced with America's first Borg president, it seems resistance really is futile . Back to the top ↑ Watch: Breaking down solutions to blockchain regulation hurdles title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
The Guardian
an hour ago
- The Guardian
Will the new Middle East crisis rock the world economy? The markets say no – but I fear they're wrong
Financial markets picked up the clear message when Donald Trump cut short his stay at the G7 summit in the Canadian Rockies this week. Despite calls from fellow western leaders to de-escalate the crisis, the president's early return to the White House was taken as a sign that the US is considering joining Israel in its military action against Iran. Trump says he wants Iran's unconditional surrender. This is where modern summitry came in half a century ago. In 1975, the first meeting of what eventually became the G7 was convened at Rambouillet in France in an attempt to work out a joint response to the oil shock that accompanied the Yom Kippur war between Israel and its neighbours. Back then, the impact of higher crude prices was immediate and brutal. The cost of crude rose fourfold in a matter of months and killed off the post-second world war boom, leading first to higher inflation and then to recession. A second dose of stagflation arrived a few years later when the Iran-Iraq war led to a further doubling of oil prices. Iraq's invasion of Kuwait in 1990 again led to higher oil prices and weaker activity. History suggests the Middle East can cause all sorts of problems for the global economy. The response to the latest conflict has been much more muted. Oil prices have risen by about $10 a barrel but that will give only a modest upward jolt to inflation and certainly nothing to compare with the shocks of the 1970s, 1980s and 1990s. At least so far. The region has form and given the risks, the financial markets are taking a remarkably sanguine view of events, even though there are reasons for a moderate degree of optimism. The first oil shock of the mid-1970s was triggered by an embargo orchestrated by Opec, a producers' cartel that is less able to affect crude prices than it was half a century ago. Some countries – the US in particular – are much less dependent on imported oil than they once were. Wind and solar power provide alternatives to fossil fuels. The war between Israel and Hamas in Gaza has been raging for almost two years, with only a small and short-lived impact on oil prices. All that said, it is less than three years since Russia's invasion of Ukraine led to a surge in global oil and gas prices, contributing to a cost of living crisis that is only just abating. The latest UK inflation figures released on Wednesday showed the annual increase in prices at 3.4% – well down on the recent 10.9% peak but still above the Bank of England's 2% target. The comparison between the start of the Russia-Ukraine war in 2022 and Israel's attacks in the past week is not exact. Russia accounts for 17% of global gas production, while Iran is responsible for just 4% of oil production and China is the biggest customer for its crude exports. That helps explain why the financial markets have been relatively relaxed, with the $10 a barrel boost to oil prices reflecting a sense that the conflict will be contained. The US's potential involvement raises the stakes. One possibility is that the deployment of US military firepower will quickly overcome Iran's resistance and lead to regime change in Tehran. Another is that Iran will retaliate by seeking to close the strait of Hormuz, a narrow passage through which 20% of the world's oil passes daily. That would send the price of oil rocketing from its current $75 a barrel to well over $100 a barrel. The shock would be more severe and longer lasting were Russia and China to get dragged into the conflict. The markets are betting that none of this happens. Oil prices are at their current level because dealers think Iran has had its military capability depleted by Israel's attacks, that Iran would damage its own economy by seeking to close the strait of Hormuz, and that Russia and China will be wary of becoming involved. Things may indeed pan out this way, but the call by the non-US members of the G7 for a de-escalation of the crisis highlights the real risk that it might not. Western economies are still feeling the effects of the Covid-19 pandemic, higher energy prices and a cost of living crisis, and could well do without another setback. Petrol prices are already set to rise, the first evidence of higher inflation and a fresh squeeze on disposable incomes. It goes without saying that it would be better for the global economy to avoid yet another Middle East oil shock. But if the financial markets have called it wrong and oil prices do start to spiral upwards, it is important that policymakers don't panic. Higher energy prices are initially inflationary but are then deflationary because they add to business costs and leave consumers with less money to spend. Central banks should resist the temptation to respond by raising interest rates because that would only add to the risks of recession and higher unemployment. Likewise, finance ministers should avoid raising taxes or cutting spending if weaker activity pushes the public finances deeper into the red. In the longer term, countries like the UK need to make themselves self-sufficient in renewable energy and thus reduce their exposure to the Middle East's fossil fuels. The lesson to be drawn from the damage caused by the repeated oil shocks since the 1970s is that we have been here before and it doesn't end well. Larry Elliott is a Guardian columnist Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here.
