MEXICO: Analyst Views On December CPI Inflation, Monetary Policy
Jan-09 15:57
- Itaú says that today’s CPI data, although close to expectations, showed more pressure at the margin at both goods and services. Looking ahead, given the USDMXN depreciation and a still tight labour market, Itaú expects inflation to run close to recent levels, without significant further disinflation. They forecast inflation at 3.9% in 2025 and expect a 50bp rate cut in February to 9.50% and a slower pace after, in tandem with the Fed, reaching 8.5% by year-end.
- Scotiabank believes that inflation risks remain biased to the upside, highlighting the possible impact of tariff measures between Mexico and the US and a possible pass-through due to FX depreciation. In their opinion, the uncertainty surrounding the trade relationship during Trump's term entails higher inflation risks. As a result, they believe Banxico will maintain a pace of 25bp cuts throughout the year.
- Banorte notes that the period is impacted by several seasonal trends, mainly at the core. As such, the rebound in goods stood out. In services, the net effect in tourism items is to the upside due to the holiday period. At the non-core, agricultural items fell 0.6%, while energy advanced 0.4%, with almost all categories higher. Following the data, Banorte lower their 2025 CPI forecasts, with headline at 4.0% at year-end (vs. 4.4% previously) and core at 3.6% (vs. 3.7%).
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STIR: Midmorning SOFR Options Add
Dec-10 15:40
- -20,000 SFRH5 95.62/95.87/96.12 call flys vs. 95.81 puts, 1.5-1.25 ref 95.875
- +2,000 SFRH5 95.87 straddles, 26.25 ref 95.87
- +5,000 SFRU6 96.62/97.12 call spds 17.0 ref 96.34
- 2,000 0QG5 95.87/96.12/96.25 broken put trees vs. 0QH5 95.75/96.12/96.25 broken put trees
CANADA: Freeland Appears To Accept Higher Fiscal Deficit Tracking
Dec-10 15:32
- Speaking to reporters in Ottawa, FM Freeland has said the government will meet its debt-to-GDP projection for FY 23-24 and will reduce the ratio over the medium term as it looks to maintain one of its fiscal anchors.
- Tellingly, our reporter writes that she declined to answer several questions about whether she’d honour a pledge to limit deficits to C$40bn after the 2024 Budget showed a C$40bn deficit in FY23-24 before C$39.8bn in FY24-25 and then declining.
- “A declining debt to GDP ratio is the guarantee, the numerical statement, of Canada’s fiscal sustainability,” Freeland said.
- This comes ahead of the government’s long-awaited Fall Economic Statement due Monday (Dec 16).
- Recall that the Parliamentary Budget Office in its Economic and Fiscal Update back in October projected a federal deficit of C$46.8bn for FY 24-25 and C$46.4bn for the current fiscal year so this is only really confirming existing tracking.
- That estimate was prior to the government announcing a two-month GST/HST break which the PBO has costed at C$1.5bn in FY 24-25 (and potentially a further C$1.3bn on top of that) plus circa C$4.5bn for a debated $250 rebate to as many as 19 million Canadians in April.
- Despite a likelihood of larger than previously budgeted deficits, a pledge to maintain a downward trajectory in the debt-to-GDP ratio looks to have modestly supported GoCs relative to Treasuries. Can-US yield differentials saw a step lower for the 2Y to new fresh multi-decade lows of -125bps whilst the 10Y differential remained at joint lows of -118bps. Monday's details will clearly be more important (plus any leaks between now and then) and of course the BoC decision tomorrow.
GILT AUCTION PREVIEW: On offer next week
Dec-10 15:30
The DMO has announced it will be looking to sell GBP3.75bln of the 4.125% Jul-29 Gilt (ISIN: GB00BQC82B83) at its auction next Tuesday, December 17.
