EM LATAM CREDIT: Argentina: Economic Team Reacts - Positive
(ARGENT; Caa1/CCC/CCC+)
Initially we got the government's political reaction after the stunning loss in Argentina's Province of Buenos Aires elections and now we get the first reaction of the economic team. They want to boost liquidity in the financial system and lower rates as current levels are viewed as slowing economic activity, according to Infobae.
There will be talks with banks to help support their operations better, possibly easing the previously announced daily reserve requirement or possibly easing the overall reserve requirement. This should all be in the context of broader monetary policy which is managing the money supply to control inflation.
Economy Minister Caputo joined the head of the Central Bank Bausilli and the Secretary of Economic Policy Daza on a local streaming service to talk about next steps. As the election approached, USD supply was limited with tighter restrictions imposed but now normal volumes are being traded according to the team.
Already the Central Bank lowered the swap rate by 10 points this week and also achieved lower yields on local bonds it placed in the market this week, according to Infobae. ARS/USD is still hovering near its recent levels post election and near the upper band where intervention may occur if breached.
ARGENT 35s were last quoted 56.63 down .81 according to Bloomberg. Bonds are down about 11 points since June 30th and 10 points YTD.
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EUROPEAN INFLATION: German Inflation Breadth Progress Continues To Stall [2/2]
MNI’s inflation breadth tracker shows disinflation overall continuing to stall in Germany in July:
- Looking at the low-inflation categories, the percentage of ECOICOP items printing at or below 1% Y/Y was unchanged at 40% while the percentage in high-inflation categories (above 5%) also declined marginally from 15% to 14%.
- The 1-3% range offset this, rising from 24% to 25% although there was still 21% in the 3-5% range, with the latter technically at its highest since February and slightly above the 19% averaged over the past year.
EUROPEAN INFLATION: Final German July Data Sees Lower Airfares, Insurance [1/2]
German final July HICP was unrevised from the flash readings at 1.8% Y/Y (2.0% prior) and 0.4% M/M. The final reading to CPI was also unrevised at 2.0% Y/Y (2.0% prior) and 0.3% M/M whilst core CPI printed at 2.7% Y/Y (2.7% prior). The main conclusions from the flash reading were confirmed.
- Services decelerated further to 3.1% Y/Y (as tracked after state-level data), the lowest rate since August 2022, with the contribution vs June falling 0.09pp. Goods inflation almost exactly cancelled that out with 1.0% Y/Y (a +0.08pp contribution vs June) for its highest since March.
- Within the services-heavy subcategories, moves were mixed and limited for the most part. Communication accelerated quite notably (-0.6% vs -1.2% prior) but it has a small weight.
- The mixed-weighting transport (1.0% vs 1.6% prior) and "other goods and services" categories (5.2% vs 5.8% prior) were more decisive this time, with airfares (-6.1% vs -1.3% prior) and insurance (5.5% vs 8.1% prior, coming from a 16.6% high last December) mainly behind the contributions declines here - that is all in line with our view from the state-level data from the flash release.
- Looking at the goods-heavy categories, clothing and footwear stood out the most, accelerating to 0.9% from -0.3% in June and pointing to less significant or changing seasonality of summer sales here.
- [See the disclaimer below the table on using the changes in contributions with caution]
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