EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.85% -2bp
10yr UST 4.29% -1bp
5s-10s UST 44.0 +1bp
WTI Crude 65.1 +0.8
Gold 3334 +9.9
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 886bp +8bp
BRAZIL 6 1/8 03/15/34 259bp -0bp
BRAZIL 7 1/8 05/13/54 362bp +0bp
COLOM 8 11/14/35 418bp -1bp
COLOM 8 3/8 11/07/54 495bp +0bp
ELSALV 7.65 06/15/35 449bp +2bp
MEX 6 7/8 05/13/37 267bp +2bp
MEX 7 3/8 05/13/55 330bp +1bp
CHILE 5.65 01/13/37 154bp +2bp
PANAMA 6.4 02/14/35 313bp +2bp
CSNABZ 5 7/8 04/08/32 585bp +3bp
MRFGBZ 3.95 01/29/31 286bp +3bp
PEMEX 7.69 01/23/50 630bp -4bp
CDEL 6.33 01/13/35 214bp +1bp
SUZANO 3 1/8 01/15/32 184bp -0bp
FX Level Δ DoD
USDBRL 5.56 +0.05
USDCLP 937.56 +2.46
USDMXN 18.9 -0.06
USDCOP 4061.70 -15.98
USDPEN 3.57 -0.01
CDS Level Δ DoD
Mexico 107 1
Brazil 152 1
Colombia 225 3
Chile 55 1
CDX EM 97.28 (0.15)
CDX EM IG 101.11 (0.07)
CDX EM HY 93.36 (0.08)
Main stories recap:
Comments
· Geopolitical stability led to a drop in equity volatility ahead of a barrage of U.S. economic data tomorrow.
· The Federal Reserve proposed cutting bank capital requirements for holding U.S. Treasuries which was supportive for the front end of the Treasury curve, but the move was muted as the initiative was already telegraphed a week ago and the pricing in of expected Fed monetary policy dominated.
· The EM primary market was active again with three mandates in Asia and six new corporate bond issues in CEEMEA.
· LATAM was also busy with the Peru sovereign issuing USD3bn 10s/30s. We have seen mandates for at least three subordinated Tier 2 bank issues, two of which may price tomorrow. We also expect Latam Airlines to issue 5NC2 notes as they announced investor meetings a few days ago.
· EM secondary market benchmark spreads were a couple bp tighter in Asia while CEEMEA spreads were broadly mixed but higher beta names tightened double digits.
· LATAM spreads generally widened a few bp. Bonds of Brazil ethanol processor and gasoline distributor Raizen widened 7bps as the company mandated investor meetings ahead of a proposed 7-year note issue.
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Historical bullets
ASIA: Coming Up In Tuesday's Asia Pac Session
| 0001BST | 0701HKT | 0901AEST | UK May BRC Shop Price Index |
| 0050BST | 0750HKT | 0950AEST | Japan Apr PPI Services |
| 0200BST | 0900HKT | 1100AEST | Australia 2034 Bond Sale |
| 0230BST | 0930HKT | 1130AEST | China Apr Industrial Profits |
| 0500BST | 1200HKT | 1400AEST | EU27 Apr New Car Registrations |
COMMODITIES: Crude Steady As Reversal Signals Remain In Play, Gold Edges Lower
- Crude erased earlier gains to be little changed on the day, as more optimism towards US-Iran negotiations and an expected OPEC+ supply hike from July offset support from a delay in US tariffs on EU imports.
- WTI Jul 25 is broadly unchanged at $61.6/bbl.
- OPEC+’s seemingly hard-line approach to punishing its overproducing members risks plunging crude into a full-blown price war, Bloomberg said.
- For WTI futures, the recovery since Apr 9 appears corrective. The medium-term bearish technical theme remains intact, with key support and the bear trigger at that Apr 9 low, at $54.33.
- For bulls, key resistance to watch is $62.66, the 50-day EMA, a clear break of which would open $65.82, the Apr 4 high.
- Meanwhile, spot gold has fallen by 0.5% to $3,342/oz, leaving the yellow metal just below Friday’s two-week high of $3,365.9.
- Amid some signs of progress in US trade negotiations, Bloomberg reports that physically backed gold ETF’s have seen five straight weeks of outflows since peaking at the highest in more than a year in mid-April.
- Medium-term trend signals for gold remain bullish, however, with moving average studies in a bull-mode position, highlighting a dominant uptrend.
- A continuation higher would open $3,435.6 next, the May 7 high. Key support and the bear trigger has been defined at $3,121.0, the May 15 low.
FOREX: USD Set To Finish Off Of Worst Levels
The USD has underperformed many of its G10 FX peers for much of the day, with ongoing policy uncertainty continuing to provide headwinds for the greenback after President Trump delayed the timeline for the imposition of 50% tariffs on the EU following a conversation with EC President Von Der Leyen.
- The BBDXY registered a fresh ’25 low, piercing the Dec ’23 low in the process. Bears will look to force a break of the ’23 closing low (1,200.41) next.
- A reminder that liquidity was thinned by the U.S. & UK public holidays.
- EUR/USD extended the recent bullish move, trading as high as 1.1419 before fading back to 1.1380. Next resistance of note seen at the 76.4% retracement of the Apr 21 - May 12 bear leg (1.1453).
- GBP/USD topped out at 1.3593 before a pullback to 1.3560. The 1.382 projection of the Feb 28 - Apr 3 - 7 price swing (1.3605) presents the next upside area of note.
- USD/JPY has recovered from the lowest levels registered in May (142.23 printed in Tokyo trade), with the wider risk reaction to the delay of the tariffs on the EU providing some counter. Spot last deals at 142.80 after reaching 143.08, with bears remaining in technical control. A move through today’s lows would expose the 76.4% retracement of the Apr 22 - May 12 bull leg (141.96). Bulls need to retake the 20-day EMA (144.66) to start turning the tide in their favour.
- Risk proxy FX (AUD, NZD, NOK & SEK) outperformed for much of the session on the U.S.-EU tariff relief but also faded from best levels against the USD.
- Note that AUD/USD cleared next resistance at 0.6515 before fading back to 0.6500.
- U.S. consumer confidence & durable goods data headlines on Tuesday, complimented by Fedspeak from Kashkari & Barkin and ECB speak from Villeroy & Nagel.
