Deutsche Bank-Asia Macro Strategy Notes CCS monitor Stuck-118458976

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 24/10/2025 05:41:34 GMTDistributed on: 24/10/2025 05:41:34 GMT24 October 2025There's been no dull moment in Asia's macro landscape since summer: re-escalating trade tensions, surprise central bank policy decisions, and the PBOC's decision to move the fixing below the long-held 7.10 key level. Yet, price actions in Asia Xccy basis have been surprisingly muted, with all pairs trading within a narrower range over the last three months compared with the average of the last eight years (Figure 1). We offer a few observations on the Asia CCS space:nNarrow Xccy basis range isn't due to lack of interest: DTCC data suggests Asia CCS trading volume has remained elevated (Figure 2 ), experiencing only a slight dip over the summer months. Notably, KRW CCS trading volume nearly doubled from the beginning of the year, even as CNH CCS and INR CCS volumes saw a decline.nElevated Xccy basis and limited receiving interest in Asia (ex-China): In Asia (excluding China), the narrow Xccy basis range likely stems from already elevated levels and a lack of appetite to receive them. While ample USD liquidity drives basis higher ( Figure 4), there's a limit: it generally can't turn positive given the USD's reserve currency status. Coupled with insufficient genuine receiving interest from corporates and asset managers, this keeps Xccy basis in Asia (ex-China) stuck in a narrow band.nDistinct dynamics for CNH Xccy basis: The reasons for CNH Xccy basis's narrow trading range are different. CNH Xccy basis is closer to the bottom of its four-year range than the top. While strong receiving interest persists, notably from dim sum bond issuances by foreign entities, the market is concerned about its sustainability. This interest could abate if funding cost savings become less attractive due to narrower USD bond-swap spreads, a flatter USD curve, and/or a lower CNH Xccy basis. On the other hand, most market participants are not convinced this is a good level to pay.nRare phenomenon: CNH front-end CCS trading below CNY: It's a rare occurrence for CNH front-end CCS to trade lower than CNY front-end CCS (Figure 5). This can be attributed to two main factors: onshore corporates are utilizing S/B FX swaps to enhance returns from their USD holdings, and ample CNH liquidity coupled with strong support from the HKMA for reliable CNH funding has kept CNH front-end CCS low.nLess attractive Reverse ASW for Thai investors: The attractiveness of reverse ASW (asset swap spread) for Thai investors has diminished (Figure 6 ). This, however, is more a consequence of the sell-off in Thai government bonds and the rally in DM government bonds, rather than a rally in THB Xccy basis itself.Bryant XuStrategist+65-6423 5558Jalaj SinghResearch AssociateDeutsche Bank AG/SingaporeIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 F