EM LATAM CREDIT: BCP (BCP): FV $10.25NC5 Tier 2 Sub

President Donald Trump is expected to address both days of the Republican midterm convention in Dallas, Texas, September 9-10. Vice President JD Vance is expected to deliver the keynote address on the second evening. Analysts have noted that a clash with the start of the NFL season is likely to impact ratings.  

• Axios reports, “The lineup also includes Treasury Secretary Scott Bessent, Health Secretary Robert F. Kennedy Jr., former White House press secretary Karoline Leavitt, Donald Trump Jr., House Speaker Mike Johnson, Senate Majority Whip John Barrasso and National Republican Senatorial Committee Chair Tim Scott.” Axios adds, “Senate Majority Leader John Thune is notably absent from the list."
• Trump indicated on Friday he intends to allocate up to $500 million from his MAGA Inc ‌super PAC for Republicans in the midterm elections, “trying to calm party worries that he will not spend the money,” per Reuters.
• MAGA Inc. announced a USD$10 million ad spend to support Texas Senate candidate Ken Paxton, who is in a tight race against Democratic nominee James Talarico. Despite the funding boost, Talarico maintains a major cash advantage as Democrats look to win a statewide race in Texas for the first time in decades. 
• Axios notes, “Talarico raised $68 million through June, compared with $9 million for Paxton. Talarico dominated the airwaves for much of the summer. The Elon Musk-funded America PAC has reported spending $2.4 million to bolster Paxton.”

The latest round of sell-side notes that we have seen don’t indicate much appetite to fade the latest sell off, while a dovish bias remains when it comes to STIR views. Some have been stopped out of steepener expressions.

• Bank of America: We continue to see a high bar for a September hike, but view November, December and February as live meetings. Combined with positioning, this increases the risks to our trade: we close long SFIH7 vs ERH7. Further out the curve, the relative weakness versus swaps may reflect concession-building ahead of the "modestly sized" syndicated re-opening of the 5.375% 2056 Gilt, alongside some fiscal concerns ahead of Parliament's return. We maintain a 2s10s Gilt steepening bias via UKT 4.375% 2028 vs. 4.875% 2036.
• Goldman Sachs: Ongoing tightness in European gas markets as the clock ticks towards winter suggests there are risks to UK front-end pricing. While there is little fundamental case for the BoE to hike beyond market pricing - even in the scenario of upside risks to gas prices - we think that risk reward in UK steepeners has shifted and close our recommendation for a loss. Alongside risks to the front-end, the focus on high energy prices and inflation will continue to pressure the UK fiscal outlook via reduced headroom, even before any fresh spending commitments. This is likely to keep risk premium and yields elevated above our forecasts. The link between UK monetary and fiscal policy to energy prices is likely to sustain a high beta of UK fixed income to global energy developments, which points to ongoing volatility and why we prefer longs in EU duration.
• J.P.Morgan: Gilt yields are higher over the past 2 weeks with the 2s/10s gilt curve flatter as UK yield moves have mainly reflected energy price dynamics at the front end o and global factors in intermediates. The latest DMP survey does not indicate any increased concerns around indirect and second-round effects. We keep received Sep26 MPC OIS. We view 1Yx1Y SONIA valuations at 4.5% as cheap vs. our baseline BoE forecast of one 25bp hike in November. However, we remain cautious on fading valuations given ongoing energy price uncertainty. We stay neutral on UK duration. However, we continue to think the current levels of 30-Year gilt yields are attractive for longer-term investors. In our view, there is little evidence that fiscal uncertainty is significantly impacting the 2s/10s curve and in the near-term we think potential volatility in the 2s/10s UST curve around US CPI and US Treasury buybacks can impact the UK curve. 10Y gilt swap spreads look fair value vs. high frequency drivers. We expect range trading over the near term.
• Societe Generale: Receiving UK 2y swaps versus the US remains our preferred expression of diverging central bank paths. The trade benefits from a more supportive BoE reaction function as well as the UK's larger sensitivity to falling oil prices. We do not expect the Autumn Budget to have a material adverse impact on the trade. At the long end, we see limited scope for a meaningful dislocation caused by either supply or the Autumn Budget.
• TD Securities: We had added to our long position in 5y Gilt ASWs based on our outlook for favourable net issuance dynamics and supportive regulatory changes. Both factors remain constructive for the sector. However, with the trade having performed as expected, we now look to re-enter closer to any concession that may emerge ahead of the UK Budget. The trade delivered approximately 5bp of C&R over our holding period.