EM LATAM CREDIT: Coca-Cola Femsa: 2Q Earnings – Neutral
(KOF; A3neg/A-/Aneg)
• Small decline in volume of 5.5% coupled with slow top line growth of 5% and EBITDA margin compression of 160bp led to a small EBITDA decline of 3.8% overall for the Mexican beverage bottler.
• Volume declines in Mexico and Panama were offset by gains in Guatemala, Nicaragua and Costa Rica resulting in flat revenues for the Mexico/Central America region while EBITDA fell 9.7% YoY as a result of a 220bp decline in the EBITDA margin from higher raw material costs and FX depreciation.
• The South American division reported better results, with Total revenues up 13.2% while EBITDA grew 10.4% because of that top line growth helped by a 50bp improvement in operating margin.
• Net debt/EBITDA was reported at a low .79x, up from .68x for 2024 while EBITDA interest coverage declined from 12.51 for 2024 to 9.67x for 2Q 2025.
• KOF 2035s issued at T+93 May 2025 tightened to last quoted at T+84bp.
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CANADA: May CPI Preview: BOC Eyeing "Recent Firmness" Carefully (1/3)
On Tuesday morning (0830ET) we get the first of two monthly CPI readings ahead of the next BOC decision on July 30.
- Consensus for the Y/Y headline reading is 1.7%, with a slight upward skew (similar to April's 1.74% unrounded figure), while the non-seasonally adjusted M/M consensus is 0.5% (MNI Median; BBG survey is same and average indicates a slight downward skew at 0.48%) after -0.1% in April.
- Meanwhile the average of the BOC's preferred trim and median core measures is seen coming in at 3.0% Y/Y (3.15% unrounded in April), the highest in over a year.
- While as noted there is another CPI report to come before the July BOC decision, another upside surprise in core measures could see a retracement of recent cut repricing (last 10bp, vs 6bp last week), with analysts remaining split on July easing expectations.
- The deliberations of the June meeting reported “If the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate".
- A reading in line with consensus would keep the door open to a cut amid a pullback in the 3mma annualized rate in trim/median average to 3.1/3.2% from 3.4% prior.
AUDUSD TECHS: Trades Through The 50-Day EMA
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6479/6552 20-day EMA / High June 16 and the bull trigger
- PRICE: 0.6428 @ 15:46 BST Jun 23
- SUP 1: 0.6373 Low Jun 23
- SUP 2: 0.6357 Low May 12
- SUP 3: 0.6309 38.2% retracement of the Apr 9 - Jun 16 bull cycle
- SUP 4: 0.6275 Low Apr 14
The medium-term trend set-up in AUDUSD is unchanged, the outlook remains bullish. However, a corrective cycle is in play and this has resulted in a break of support around the 50-day EMA, at 0.6435. A clear break of this average would signal scope to a deeper correction and open 0.6357, the May 12 low. Clearance of this support would highlight a stronger reversal. Initial resistance to watch is 0.6479, the 20-day EMA.
US TSYS: Tsys Bid With Stocks, Not the Reaction You Were Expecting
- Treasuries looked to finish higher Monday (TYU5 +11.5 at 111-11), curves bull steepening (2s10s +2.645 at 49.176) as rates & stocks rallied on initially muted response by Iran to US bombing over the weekend.
- Stocks extended gains even after Iran launched missiles at US base in Qatar, possible face saving measure as Iran warned US prior, most if not all missiles intercepted.
- Risk gained traction on dovish comments on potential rate cuts from Fed VC Bowman and Chicago Fed Goolsbee if inflation remains muted.
- Projected rate cut pricing gains traction vs. this morning's levels (*), Dec at the highest since May 12: Jul'25 at -5.9bp (-3.6bp), Sep'25 at -25.2bp (-19.5bp), Oct'25 at -32.6bp (-40.7bp), Dec'25 at -58.8bp (-49.9bp).
- Existing home sales unexpectedly ticked up in May to a 4.03M seasonally-adjusted annual pace, from 4.00M in April (and vs 3.95M survey).
- Flash S&P manufacturing PMI held steady at 52.0 for a second month (cons 51.0) after 50.2 in both March and April whilst services dipped to 53.1 (cons 53.0) after 53.7 in May.
