MEXICO: Core Inflation Adjustments a Modest Hawkish Development

The Fed's latest consumer credit report shows a sharp slowdown in the growth of total credit, to a 6-month low of $363M M/M (or 0.1% M/M). It was well below the $14.0B expected and follows July's $18.0B rise (4.3% M/M) gain, which was upwardly revised from $16.0B. 

• The pullback was driven by a $6.0B drop in revolving credit outstanding, the biggest decline in 9 months, partially reversing a $11.2B rise in July. Non-revolving credit continued to rise steadily, by $2.3B (slowest in 4 months but around the prior 6-month average of $1.9B). Recall that revolving makes up 25% of overall consumer credit, largely made up of credit cards; nonrevolving credit is basically made up of student and auto loans.
• The month-to-month readings continue to be volatile but overall consumer credit is showing signs of steadying out, with Y/Y of 2.0% basically the same pace as the prior 4 months, albeit this belies a notable slowdown in revolving credit (2.6% in August weakest since Q3 2021).
• We wouldn't rush to conclusions from these data though overall it continues to appear that credit is not a strong tailwind to consumption.
• On a 3M/3M annualized basis, credit growth is running at 2.2%, which is not particularly impressive compared with nominal GDP rising roughly 6% in the quarter. It suggests a fairly limited credit impulse in terms of contribution to overall activity, versus a solidly positive set of readings in Q2.

Option desks report light SOFR/Treasury call option trade overnight, leaning towards low delta puts as the US Gov shutdown continues. Underlying Tsy futures firmer, off late session highs after climbing steadily off this morning's lows (TYZ5 112-09 low, September 28 level). Projected rate cut pricing has gained slightly vs. early morning levels (*): Oct'25 at -23.7bp (-23.1bp), Dec'25 at -45.1bp (-44.2bp), Jan'26 at -55.7bp (-54.6bp), Mar'26 at -66.4bp (-65.4bp).

• SOFR Options:
  • +10,000 SFRZ5 96.62/96.75 call spds 0.5 ref 96.32
  • +15,000 SFRZ5 96.62/96.68 call spds, cab vs. 96.30/0.05%
  • Update, +12,500 SFRZ5 96.43/96.50/96.56 call flys, 0.25
  • +15,000 SFRZ5 96.50/96.62 call spds, 1.0
  • 1,000 SFRZ5 96.18/96.37/96.56 2x3x1 put flys
  • +1,500 0QV5 96.87/97.06 strangles, 1.5 vs. 96.91/0.20%
  • 1,750 0QV5 96.62/96.75/96.87 put flys, 0.5 vs. 96.955/0.08%
  • +3,000 SFRZ5 96.50/96.62 call spds, 1
  • -4,100 SFRV5 96.31 puts, 1.25 ref 96.315
• Treasury Options:
  • 4,400 USZ5 115 puts, 51 ref 116-26
  • -15,000 FVX5 108.5/110 call over risk reversals, 0.5
  • 10,000 USX5 109 puts, 2 ref 116-17
  • 2,000 FVX5/FVZ5 110 put spds
  • 7,500 FVX5 110 calls 3, ref 109-05.5
  • 3,225 TYX5/TYZ5 111/111.5 put spd spd
  • +5,000 TYX5 112.5/113.5 call spds 7 over 111.25 put vs. 112-05.5/0.41%
  • -1,000 TYX5 111.25/113.5 strangles, 11 vs. 112-07/0.02%
  • -2,000 TYX5 112.5 calls, 24 vs. 112-12.5/0.44%
  • 4,000 Tue/wkly 10Y 111.5 puts ref 112-11 (exp 10/14)
  • -5,500 wk2 US 115 puts, 4 ref 116-07
  • +1,000 wk3 FV 109.25/109.75 4x5 call spds, 27 vs. 109-04/0.92%
  • -5,400 TYZ5 109.5 puts, 4 ref 112-14 to -14.5

• MNI: US AUG CONSUMER CREDIT +$0.4B
• US AUG REVOLVING CREDIT -$6.0B
• US AUG NONREVOLVING CREDIT +$6.3B