EM LATAM CREDIT: Argentina: Anticipated Changes - Neutral
(ARGENT; Caa1/CCC/CCC+)
"A tense internal climate within the government after the defeat: the Menems were targeted and there are calls for changes." - Infobae
Seems like a cabinet shakeup is less likely, despite that being a typical strategy after a government takes a big political loss, as President Milei took responsibility for the defeat and recognizes that the cabinet didn't do anything wrong as economic and monetary policies were determined at the highest levels of government.
Uniting the allied Propuesta Republicana (PRO) and Milei's LLA against the opposition will be part of the solution as there was a splintering that contributed to the big loss overall.
What is possible is a change in who decides which candidates will run for office in various legislative elections as well as becoming more flexible in dealing with the PRO which is an allied party but has its own ideas and doesn't want to be dictated to.
Eduardo "Lule" Menem, an influential advisor to the Milei family might be vulnerable as he is also near the center of the alleged kickback scandal. The party's provincial leader Sebastien Pareja was also suggested acccording to local news outlet Infobae as he was influential in determining who would run in the elections.
There were also indications that leaders within the allied PRO party were turned off by strong arm tactics of the LLA that led to a splintering so what must be done is more work to unite ahead of next month's national elections.
ARGENT 35s have stabilized a bit after falling nearly 6 points today, last quoted 55.93. Expectations for a win in the opposition stronghold might have been too high and do not necessarily predict the outcome in the midterms so we may see a near term bottom here, though how they will deal with the kickback scandal will also be important to see as well as further evidence that might be revealed
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
