EM LATAM CREDIT: Braskem: S&P Downgrade to B+, O/L Neg - Negative

Dovish ’26 BoE pricing moves have pulled the SONIA/Euribor Dec ’26 (Z6) spread off yesterday’s multi-week closing highs.

• We suggested that the data wasn’t much of a gamechanger for near-term BoE meeting pricing in the immediate aftermath of the release and that seems to have played out, with the initial hawkish reaction in the front contracts countered.
• The recent run of UK data had resulted in ~18bp of spread widening since August 1, as of yesterday’s close.
• The spread is mainly being driven by the UK leg, with Euribor pricing more stagnant since the July ECB decision.
• The main development since the ECB's July decision has been the EU-U.S. trade agreement. While the agreement reduced near-term trade policy uncertainty, the level of tariffs is more onerous than assumed in the ECB's baseline scenario.
• That said, ECB President Lagarde noted this morning that the agreement is "well below" the June MPR projection severe scenario". How the agreement is incorporated into the September forecast round will be a key focus as we move forwards.
• A reminder that the ECB adopted a less dovish round of rhetoric after its most recent cut.
• Euribor futures start to price chances of a hiking cycle in H226, after leaning towards one further cut in the current cycle.

Fig. 1: SONIA/Euribor Dec’26 Spread (bp) 

Source: MNI - Market News/Bloomberg Finance L.P.

• Secured Overnight Financing Rate (SOFR): 4.33% (-0.01), volume: $2.760T
• Broad General Collateral Rate (BGCR): 4.31% (-0.02), volume: $1.144T
• Tri-Party General Collateral Rate (TCR): 4.31% (-0.02), volume: $1.118T
• (rate, volume levels reflect prior session)

Latest Tsy quarterly futures roll volumes from September'25 to December'25 below. Pace is rising slowly ahead the "First Notice" date on August 29. Current roll details:

• TUU5/TUZ5 appr 88,900 from -8.12 to -7.88, -8.0 last; 6% complete
• FVU5/FVZ5 appr 32,700 from -5.0 to -4.5, -4.75 last; 10% complete
• TYU5/TYZ5 appr 28,700 from -0.5 to +0.0, -0.25 last; 5% complete
• UXYU5/UXYZ5 under 6,900 from 0.5 to 1.0, 0.5 last; 3% complete
• USU5/USZ5 appr 500 from 13.25 to 13.75, 13.25 last; 8% complete
• WNU5/WNZ5 appr 3,600 from 8.0 to 8.5, 8.25 last; 4% complete
• Reminder, Sep futures don't expire until next month: 10s, 30s and Ultras on September 22, 2s and 5s on September 30. Meanwhile, Sep'25 Tsy options will expire this Friday, August 22.