EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.84% +4bp
10yr UST 4.28% +4bp
5s-10s UST 44.8 +0bp
WTI Crude 65.1 -0.2
Gold 3271 -57.0
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 879bp -3bp
BRAZIL 6 1/8 03/15/34 259bp -3bp
BRAZIL 7 1/8 05/13/54 361bp -4bp
COLOM 8 11/14/35 421bp -2bp
COLOM 8 3/8 11/07/54 495bp -1bp
ELSALV 7.65 06/15/35 448bp -5bp
MEX 6 7/8 05/13/37 261bp -7bp
MEX 7 3/8 05/13/55 321bp -8bp
CHILE 5.65 01/13/37 152bp -5bp
PANAMA 6.4 02/14/35 311bp -5bp
CSNABZ 5 7/8 04/08/32 586bp -5bp
MRFGBZ 3.95 01/29/31 287bp -4bp
PEMEX 7.69 01/23/50 616bp -9bp
CDEL 6.33 01/13/35 214bp -4bp
SUZANO 3 1/8 01/15/32 182bp -5bp
FX Level Δ DoD
USDBRL 5.48 -0.01
USDCLP 940.67 +9.00
USDMXN 18.9 -0.03
USDCOP 4098.27 +55.92
USDPEN 3.55 -0.00
CDS Level Δ DoD
Mexico 109 3
Brazil 153 (0)
Colombia 226 1
Chile 55 0
CDX EM 97.30 (0.01)
CDX EM IG 101.13 (0.00)
CDX EM HY 93.42 0.00
Main stories recap:
Comments
· Reports that the U.S. Commerce Secretary announced a signed trade deal with China as well as more on the way was supportive for a global rally in equity indexes.
· Treasury yields rose about 4bp as core PCE, the Fed’s preferred inflation gauge, disappointed and consumer expectations of inflation, as reflected in the University of Michigan survey, eased slightly but remained elevated.
· EM secondary market benchmark bond spreads trended tighter across the globe with CEEMEA moving in a -15/+5bp range of spread movement while LATAM spreads were about 5-10bp tighter.
· Bond prices of Brazil based chemical company Braskem rose more than a point as an environmental liability issue complicated the takeover bid process which could delay a potential debt restructuring.
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Historical bullets
BONDS: US Roll Pace Update: All But Done
A final update on estimated June/Sept futures rolls which are all but complete:
- TUM/TUU - 2 Yr. . .95.3%
- FVM/FVU - 5 Yr. . .94.4%
- TYM/TYU - 10 Yr. . .91.7%
- USM/USU - 30 Yr. . .96.5%
- WNM/WNU - Ultra. . .97.7%
- UXYM/UXYU - 10Y Ultra... 92.9%
USDCAD TECHS: Trend Remains Bearish And Gains Appear Corrective
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4111 High Apr 4
- RES 2: 1.3977/1.4016 50-day EMA / High May 12 and 13
- RES 1: 1.3875 20-day EMA
- PRICE: 1.3819 @ 16:47 BST May 27
- SUP 1: 1.3686 Low May 26
- SUP 2: 1.3643 Low Oct 9 ‘24
- SUP 3: 1.3579 1.500 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
A downtrend in USDCAD remains intact and short-term gains are considered corrective. The pair has recently traded through support at 1.3751, the May 6 low. This confirmed a resumption of the downtrend and has maintained the sequence of lower lows and lower highs. Scope is seen for an extension towards the 1.3600 handle while further out, the move down opens 1.3420, the Sep 25 ‘24 low. Initial resistance is 1.3875, the 20-day EMA.
US TSYS: Modestly Weaker Having Held Key Round Levels
Cash Treasuries weakened Wednesday after three flat/positive sessions, with some light bear steepening in the cash curve.
- Treasury-negative headlines/macro developments were actually limited (a long-end Japanese bond auction went softly overnight), with yields moving lower in early trade before pushing sharply higher in late morning.
- At that point Tsys, found a bid as 30Ys touched 5.00% with 10Ys just under 4.50%. Overall, trade was mostly within Wednesday's ranges.
- The session featured a very solid 5Y Note auction, which saw a 0.4bp trade-through and a record-high takedown for 5s by indirect bidders (and one of the lowest-ever primary dealer takeups), helping yields consolidate into the close.
- The May FOMC meeting minutes cast a lightly hawkish tone in MNI's view, with little to no emphasis on the possibility of tariff-driven inflation proving to be a one-off shock. However the accounts were seen as relatively stale given developments in the last 3 weeks, and met with limited market reaction.
- In data, regional Fed surveys (Dallas services, Richmond manufacturing and services) were mixed but generally saw some stabilization in May, while Redbook retail sales continued to indicate resilient consumer activity into late May.
- Latest cash levels: 2-Yr yield is up 0.9bps at 3.9901%, 5-Yr is up 3bps at 4.0635%, 10-Yr is up 3.2bps at 4.4753%, and 30-Yr is up 2.1bps at 4.9717%.
- Note that with the Jun/Sep futures roll all but complete (all contracts 90+% through), September becomes the front contract.
- Thursday's schedule includes the 2nd reading of Q1 GDP alongside weekly jobless claims, with appearances by Fed's Barkin, Goolsbee. Kugler, and Daly.
