EM LATAM CREDIT: America Movil: Local Note Tap - Neutral

As we noted Tuesday after the April CPI release, ("Mixed Evidence Of Tariff Impact On April Goods CPI",  link), we saw evidence of the the impacts from tariff-induced pickups in inflation as mixed - largely confined to isolated categories, with some tariff-sensitive items actually seeing deflation.

• That said, as we pointed out, the biggest hint of a tariff-induced pickup is core goods ex-used vehicles picked up, and the bottom in this CPI aggregate appears to have been in December. There is every reason to believe it will continue increasing in coming months as tariffs come into effect.
• Analysts were themselves mixed on the degree to which there was evidence of tariff passthrough in April's report, though generally it is thought there will be a pickup in the impact in the months ahead. We highlight a few takes below, in alphabetical order of institution:
• BNP Paribas: "While apparel prices took a breather, household furnishings, medical care goods, recreation goods, and information technology goods, and miscellaneous goods all made relatively strong gains on the month. In our view, this is probably the clearest evidence yet of tariff starting to percolate into consumer price data."
• BofA: "There was maybe a hint of tariffs in the data as a few line items with significant imports-household furnishings, medicinal drugs, IT commodities, and toys-saw price increases accelerate this month. But we continue to expect clearer evidence in the months ahead."
• CIBC: "goods prices remain[ed] tame -- including tariff-sensitive categories like cars and apparel. But we're still waiting for the other shoe to drop."
• Desjardins: "It is difficult to see in today’s data a clear-cut impact of the US tariffs "
• Deutsche: "While not particularly widespread, some categories seemed to show initial signs of being impacted by the early February tariffs. Household furnishings and supplies grew by 0.22% (vs. +0.21%) buoyed by an +0.8% gain in appliances, the largest price gain since early 2022. Other recreational commodities also saw large gains, e.g. an 8.8% spike in prices for audio equipment and a 2.2% rise in prices for photographic equipment and supplies."

European yields rose Wednesday for the third session this week, with periphery EGB spreads narrowing.

• Core FI as well as periphery EGBs turned lower in the afternoon session after a mixed morning, despite relatively limited macro and news flow.
• US Treasuries set the tone, trading heavily throughout the day, while also potentially weighing was US President Trump's hint at potential news on the Russia-Ukraine conflict at some point today.
• BoE hawkish dissenter Mann pointed to a more resilient labour market than had been expected, along with concerns that inflation expectations have increased.
• Though Mann's commentary didn't move markets, Gilts underperformed on the day as the UK curve bear flattened; the German curve bear steepened.
• Periphery EGBs' early outperformance faded, with the 10-year BTP/Bund spread briefly moving below 100bp handle for the first time since September 2021, but closing above that mark. GGBs outperformed overall.
• Thursday's calendar includes preliminary Q1 UK GDP data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.4bps at 1.94%, 5-Yr is up 2.4bps at 2.269%, 10-Yr is up 1.9bps at 2.699%, and 30-Yr is up 2bps at 3.146%.
• UK: The 2-Yr yield is up 4.4bps at 4.024%, 5-Yr is up 5.3bps at 4.184%, 10-Yr is up 4.3bps at 4.713%, and 30-Yr is up 4.2bps at 5.469%.
• Italian BTP spread down 0.6bps at 101.2bps /Greek down 2.3bps at 76.5bps
   

• Spot gold has fallen by 2.2% to $3,178/oz today as the moderation in US/China trade tensions continues to support global risk sentiment, weighing on the yellow metal.
• The move breaches initial support at $3,202.0, the May 1 low, signalling scope for a deeper retracement towards $3,164.3, 61.8% of the Apr 7 - Apr 22 upleg.
• The 50-day EMA, another key support, is also at $3,164.9. A breach of both would undermine a short-term bullish theme, opening round number support at $3,100.0. Initial resistance is $3,267.9, the 20-day EMA.
• Silver is also weaker today, with the precious metal currently 2.3% lower on the session at $32.2/oz.
• The gold/silver ratio thus remains stable around 98.7, off from last month’s multi-year highs of 107. Initial support is the April 4 low at 97.4.
• Meanwhile, crude is softer on the day with an unexpected US crude stock build adding pressure.
• WTI Jun 25 is down by 0.7% at $63.2/bbl.
• Expectations are growing that a further increase in OPEC+ supply for July is to be announced at the June 1 meeting.
• A downtrend in WTI futures remains intact, with initial support seen at $54.67, the Apr 9 low and bear trigger.
• On the upside, a clear break of key resistance at $63.55, the 50-day EMA, would highlight a stronger reversal, opening $66.41, the Apr 4 high.