EM CREDIT UPDATE: EM Credit Update
Global liquid EM sovereign bonds both high grade and high yield were generally down .75 to 1 point post the US labor report surprise. Names like SOAF and KSA in the long end were down more than a point and .75 point in the belly while TURKEY, REPHUN and ARGENT were better behaved down .25 - .75 points. In Latam, recently issued Codelco 10yr bonds were .30 lower than new issue pricing while new Mex 10s/30s were down .65 and .90 respectively and new Chile 12 yr fell .60 from issuance with almost all of those losses from new issue coming from today’s sell off. The new YPF 9 yr traded lower but unchanged from issuance, giving up gains from two days ago. The headline payroll number of +256k vs 160k expected and 4.1% vs 4.2% from the household survey triggered an immediate selloff in 10 year Treasuries of ¾ point and a point in the long end with liquid EM adjusting quickly while off the run high yield corporate bonds re-priced slower. Treasuries recovered somewhat, only down ½ point 10y and longer, but EM bonds have generally not bounced back.
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SONIA: SFIM5 96.15/96.45/96.75 Call Fly Lifted
SFIM5 96.15/96.45/96.75 call fly paper paid 3.75 on 25K
CAD: CAD/JPY Uptrend Firms Further on Hawkish 50bpc BoC Cut
As noted above, USD/CAD slips sharply on the back of the BoC decision - dragging the pair through to new daily lows of 1.4127 and through yesterday's lows. The effect on CAD/JPY clear to see, as the cross tests new December highs and narrows the gap with the 100-dma of 107.96.
- This keeps the longer-term uptrend in CAD/JPY intact, as defined by the uptrendline drawn off the 2020 low at 73.82 (crosses at 105.58 today).
US: House To Vote On NDAA Today
The US House of Representatives is expected to vote on final passage of the ~USD$884 billion FY2025 National Defense Authorisation Act at 16:00 ET 21:00 GMT today. The Pentagon bill is a 1% increase in topline spending from the FY24 package. The must-pass piece of legislation usually sails through Congress but is looking more challenging this year with clashes over topline spending and ‘culture war’ provisions.
- Punchbowl reports: “The centerpiece of this massive 1,800-page-plus package is a 14.5% pay raise for junior enlisted service members and a 4.5% pay raise for all other service members. This is a huge deal.”
- House Armed Services Committee Chair Mike Rogers (R-LA) said yesterday: “We’ll win tomorrow, but it will be close," adding he didn't understand why Republican culture war provisions were included as they will be nixed by the Trump administration in January.
- House Speaker Mike Johnson (R-LA) told reporters he expects to conclude work on Continuing Resolution to avert a government shutdown on December 21 as soon as today. The CR is expected to punt government funding until mid- to late-March.
- House Majority Leader Steve Scalise (R-LA) said yesterday that the CR will still include a “large” disaster relief package but it will be trimmed from the USD$115 billion requested by President Biden.
- Axios reports that Congressional leaders are working to include restrictions on U.S. investments in China in the CR, after the package of China bills was excluded from the NDAA.
