CHILE: Camara Swap Rates Decline As BCCh Minutes Highlight Rate Cut Discussion
- After opening on the front-foot, the Chilean peso has pared some of its gains following the minutes, but remains 0.35% firmer against the dollar today. Meanwhile, camara swap rates have fallen across the curve, amid a decline in core rates, with yields 14bp lower around the 18-month segment.
- The move comes as today’s BCCh minutes revealed that the Board discussed the option of cutting by 25bp at its April MPC meeting. All members also acknowledged that the external scenario might require the policy rate to approach the neutral level sooner than anticipated in the March IPoM.
- While inflation risks have not materialised, all members agreed that it was necessary to gather more information to assess the impact of the external scenario and its implications for monetary policy.
- This week’s BCCh economist survey revealed that analysts see the BCCh staying on hold at the June and July meetings, followed by 50bp of easing by year end. This is consistent with the March IPoM, which pointed to 25bp cuts in September and December. Today’s minutes raise the potential of an earlier rate cut around mid-year.
- The central bank trader’s survey will be released on Monday, including market participants forecasts for the interest rate outlook, alongside Q1 GDP stats.
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GREECE AUCTION PREVIEW: On offer tomorrow
The PDMA has announced it will look to sell E200mln of the 3.875% Mar-29 GGB (ISIN: GR0124035693) at auction tomorrow.
US DATA: Soft Import Inflation But Some Slightly More Positive Core PCE Tracking
Import prices were notably softer than expected in March along with downward revisions to February, although firm details for a specific airfare series could have boosted core PCE estimates a touch. Import inflation should see a boost ahead from recent dollar weakness but the fit is clearly not great.
- Overall import prices fell -0.1% M/M (cons 0.0%) in March after a downward revised 0.2% (initial 0.4%) in February.
- For a better idea of underlying price pressures, imports ex petroleum prices saw a larger miss with 0.0% M/M (cons 0.3) after 0.1% (initial 0.4%).
- It saw ex-petroleum import price inflation ease two tenths to 1.6% Y/Y for its lowest since August via recent highs of 2.3% Y/Y in Oct and Dec.
Within the details, air passenger fares increased 0.6% M/M in NSA terms, between 2024 and 2023 values but higher than most readings in prior years. Morgan Stanley see this as 1% M/M in seasonally adjusted terms vs -4.5% M/M expected and have nudged their core PCE estimate from 0.08% M/M (in line with other analysts) a touch to 0.10% M/M.
US SWAPS: Spreads Widen With SLR Discussions "Underway"
Swap spreads widen as Deputy Treasury Secretary Faulkender notes that “conversations are being had on the SLR”, with the Tsy investigating how binding the SLR is in times of stress.
- An SLR tweak has been touted in recent months but the combination of suppressed levels of swap spreads (following last week’s sell off) and communication pointing to discussions on the matter being underway, as opposed to pure speculation surrounding the idea, drive today’s move
- Fed Governor and nominee for Vice Chair of Supervision Bowman has previously touted the potential for SLR reform.
- Spreads last 0.4-2.2bp wider, with the 7- to 10-Year zone outperforming on the spread curve.
- TY futures also touch fresh session highs on the move, before fading.
