EM LATAM CREDIT: LATAM Credit Market Wrap

Jun-09 20:20

Source: Bloomber Finance L.P.

Measure Level Δ DoD
5yr UST 4.08% -4bp
10yr UST 4.48% -3bp
5s-10s UST 39.2 +1bp
WTI Crude 65.3 +0.7
Gold 3329 +18.6

Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 881bp -2bp
BRAZIL 6 1/8 03/15/34 258bp +0bp
BRAZIL 7 1/8 05/13/54 357bp +1bp
COLOM 8 11/14/35 414bp +3bp
COLOM 8 3/8 11/07/54 503bp +4bp
ELSALV 7.65 06/15/35 430bp +1bp

MEX 6 7/8 05/13/37 264bp -1bp
MEX 7 3/8 05/13/55 327bp -1bp
CHILE 5.65 01/13/37 146bp +3bp
PANAMA 6.4 02/14/35 323bp +1bp

CSNABZ 5 7/8 04/08/32 571bp -2bp
MRFGBZ 3.95 01/29/31 275bp +3bp
PEMEX 7.69 01/23/50 640bp +4bp
CDEL 6.33 01/13/35 206bp +1bp
SUZANO 3 1/8 01/15/32 190bp +2bp

FX Level Δ DoD
USDBRL 5.56 +0.00
USDCLP 936.79 +1.91
USDMXN 19.0 -0.07
USDCOP 4144.30 +27.86
USDPEN 3.63 -0.02

CDS Level Δ DoD
Mexico 113 (2)
Brazil 157 (2)
Colombia 236 1
Chile 55 (1)
CDX EM 97.22 0.05
CDX EM IG 101.14 0.05
CDX EM HY 93.16 0.08

Main stories recap:

Comments

·        U.S. equities advanced marginally while U.S. Treasury yields fell a couple of bps as tariff talks continued with China.

·        Crucial CPI data scheduled for Wednesday and the monthly bond auction refunding this week of 3s, 10s and 30 year bonds could cause some near term volatility in the coming days.

·        EM Asia secondary market benchmark USD bond spreads were quoted widening up to 10 bps while CEEMEA spreads moved in a -10/+10 bps range.

·        LATAM spreads were generally mixed with some Brazil corporate bonds of Raizen, Braskem and Brava Energia tightening 5-15bps while others like Suzano, Vale and Marfrig widened 2 bps.

·        In Mexico, Pemex bonds widened 3-5bps while Liverpool and Mex sovereigns tightened a couple.

·        Colombia bonds widened 3-7bps after the finance minister announced late Friday that the government would no longer attempt to adhere to the fiscal rule and that debt would increase.

 

image

Historical bullets

MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]

May-09 20:17
  • Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
  • Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
  • Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
  • Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.

MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]

May-09 20:15
  • The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
  • Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
  • A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
  • This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
  • Markets currently price a next Fed cut with the September FOMC meeting.

USDCAD TECHS: Pressuring Resistance

May-09 20:00
  • RES 4: 1.4296 High Apr 7
  • RES 3: 1.4111 High Apr 4 
  • RES 2: 1.4041 50-day EMA 
  • RES 1: 1.3943 High May 9
  • PRICE: 1.3930 @ 16:06 BST May 9
  • SUP 1: 1.3751 Low May 6 
  • SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
  • SUP 3: 1.3696 Low Oct 10 2024
  • SUP 4: 1.3643 Low Oct 9 ‘24 

USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.