CHILE: Chile Central Bank Review – July 2022
Jul-14 10:48
- The BCCh Board decided to raise the monetary policy interest rate by 75bp to 9.75% in a unanimous vote. This was above the modal forecast within the Bloomberg survey and was against prior guidance that the hiking pace would decelerate from the previous meeting. However, recent developments regarding inflation and the weaker CLP had prompted several analysts to revise their forecasts to more hawkish predictions.
- Despite the above consensus hike, analysts note that markets had been priced for even bolder action and therefore the Chilean peso may struggle to garner immediate support at the open.
- Following the central bank’s statement on potential currency intervention, the statement language reiterated that “markets have been able to properly absorb shocks, and volatility in the foreign exchange market has not been transmitted to other segments of the financial system, which have operated with adequate levels of liquidity.”
- Towards the end of the statement, the BCCh note that currency developments may place further upward pressure on local prices. Omitting any guidance towards the size of future hikes, the board state “estimates that new increases in the MPR will be necessary to ensure the convergence of inflation to 3% in two years.”
- Link to statement here: https://www.bcentral.cl/documents/33528/3379419/pr_13072022.pdf/1e02d00b-ec58-9d9f-46f8-9660dd28510e?t=1657747849163
- The minutes of this meeting will be released on July 28. The next Monetary Policy Meeting will be held on Tuesday, September 6.
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US TSYS: Bull Steepening As Hike Pricing Pulls Back From Extremes
Jun-14 10:48
Treasury yields have retreated from Monday's highs, but remain well above levels at the start of the week.
- The curve has steepened with the front end outperforming as Fed rate hike expectations pull back from extremes. Total hikes priced by end-2022: 277bp, a few bps lower than late Monday, but 12bp below overnight highs. 75bp hikes in Jun and Jul are still roughly fully priced though.
- The 2-Yr yield is down 7.2bps at 3.2819%, 5-Yr is down 6.9bps at 3.4135%, 10-Yr is down 6.5bps at 3.2952%, and 30-Yr is down 5.1bps at 3.2967%.
- The market tone remains cautious. The USD has held Monday's gains, while stock futures have faded most of the Asia-Pac rebound.
- Main item on the calendar aside from the beginning of the 2-day FOMC meeting is May PPI (0830ET), which could have implications for the Fed's perceptions of inflationary pressures.
- We'll be publishing a short update to our Fed preview to account for late Monday's developments.
- Earlier, May NFIB Small Business Optimism came in line w expectations (93.1 vs 93.0 survey).
US 10YR FUTURE TECHS: (U2) Trend Needle Points South
Jun-14 10:44
- RES 4: 120-19+ High May 26 and bull trigger
- RES 3: 119-19+ 50-day EMA
- RES 2: 119-16+ High Jun 1
- RES 1: 116-25/118-10+ High Jun 13 / 20-day EMA
- PRICE: 115-24+ @ 11:29 BST Jun 14
- SUP 1: 114-20+ Low Jun 13
- SUP 2: 114-11 1.00 proj of the Mar 31 - May 9 - 26 price swing
- SUP 3: 113-19 Low Jun 19, 2009 (cont)
- SUP 4: 112-27+ 1.236 proj of the Mar 31 - May 9 - 26 price swing
The trend needle in Treasuries continues to point south. Yesterday’s move lower confirmed a break of key support and a bear trigger at 116-21, May 9 low. This has confirmed an extension of the bear leg that started on May 26 and a resumption of the primary downtrend. The move lower signals scope for weakness towards 114-11 next, a Fibonacci projection. Firm resistance is seen at 118-10+, the 20-day EMA.
EUROZONE ISSUANCE: DDA update: Cut off spread set
Jun-14 10:40
- 0.50% Jan-40 Green DSL
- Books: Almost E14bln
- ISIN: NL0013552060
- Size: E4-5bln
- Cut off spread set at 4.75% Jul-40 DSL + 37.0bp (from preliminary initial spread guidance of +34-38bp then +35-39bp then + 35-38bp + 35.5-37.5bp then + 37.0-37.5bp).
- Timing: Pricing later today
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