MEXICO: Banxico Minutes Seen As More Hawkish Among Analysts
May-27 11:11
- **Banorte: In their view, the document shows an even more hawkish bias than the statement. They see greater concerns about the inflation outlook given new shocks and risks.
- Given the tone of the minutes and recent interviews, their assessment of each members’ views and the balance of the Board, our inflation and Fed path forecasts, Banorte see an even more front-loaded hiking cycle.
- Specifically, they now expect a 75bps rate hike on June 23 (previous: +50bps). Moreover, they see the year-end rate at 9.50% (previous:9.00%), instead of reaching this terminal rate by early 2023.
- **Goldman Sachs: In their assessment, the minutes are more hawkish than the statement and suggest, given the hawkish balance of views within the MPC, a relatively low bar for the MPC to accelerate the pace of tightening from 50bp to 75bp.
- If the inflation releases ahead of the June 23 MPC meeting do not show clear signs that inflation has peaked the probability of a 75bp hike is higher than even.
- **JPMorgan: JPM now expect Banxico to hike 75bp in June to 7.75%. In their view, Banxico’s strong commitment with inflation expectations and its long-term target warrant a shift in the policy stance next month.
- With inflation expected to surpass 9%saar levels by the end of 2Q—by their estimates and Banxico’s—it should not be surprising that the bank turned up its hawkishness by one notch.
- Of note, JPM see only one 75bp hike, followed by 50bp in August and September, and 25bp hikes in 4Q, reaching 9.25% by December. They are maintaining our call for rate cuts starting in August 2023.
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US EURODLR FUTURES: Post-LIBOR Settle Update: 3M Inches Higher
Apr-27 11:01
Lead quarterly EDM2 holding at 98.15 (+0.010) after latest 3M LIBOR set' inches to new 2-year high of 1.23886% (+0.00072), up +0.02515 for the week. Balance of Whites (EDU2-EDH3) trade +0.005-0.010 higher, Reds (EDM3-EDH4) gain +0.010-0.020, Greens-Golds (EDM4-EDH7) steady to -0.010 lower.
- Inversion holding in front Reds: Red Sep (EDU3) currently trading 96.705 vs. Red Jun (EDM3) at 96.635 -- low measure of confidence in forward policy and/or Fed managing a soft landing/avoiding recession has been priced in for months. Levels start to flatten out (dis-invert) around late Blue Mar'26/Gold Jun'26 trading around 97.12.
- Tuesday derivatives roundup: FI option theme pivoted to better put buying Tuesday. Eurodollar and Tsy futures surged in early trade, scaled back support in the second half, some put buyers looking for the primary downtrend to resume.
- That said, short end support remained robust as market tamps down on market pricing in chances of 75bp hike(s), back to pricing in nearly five 50bp hikes over the next six meetings.
- Salient Eurodollar trade included a buyer of +15,000 Sep 96.25 puts, 6.5 screen/pit in the second half. Early limited downside put fly trade included a block buy of 5,000 Jun 98.00/98.12/98.25 put flys, 2.5, buy of 4,000 short May 96.25/96.37/96.50 put flys.
LIBOR: JAPAN FIX - 27/04/22
Apr-27 11:01
- JY0001M -0.05347 0.00000
- JY0003M -0.01754 0.00000
- JY0006M 0.03255 0.00000
US MBA: REFIS -9% SA; PURCH INDEX -8% SA THRU APRIL 22 WK
Apr-27 11:00
- US MBA: REFIS -9% SA; PURCH INDEX -8% SA THRU APRIL 22 WK
- US MBA: UNADJ PURCHASE INDEX -17% VS YEAR-EARLIER LEVEL
- US MBA: 30-YR CONFORMING MORTGAGE RATE 5.37% VS 5.20% PREV
