EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.96% +2bp
10yr UST 4.38% +4bp
5s-10s UST 42.3 +1bp
WTI Crude 68.0 +1.0
Gold 3340 +3.0
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 902bp +23bp
BRAZIL 6 1/8 03/15/34 245bp +4bp
BRAZIL 7 1/8 05/13/54 347bp +1bp
COLOM 8 11/14/35 400bp +6bp
COLOM 8 3/8 11/07/54 468bp +4bp
ELSALV 7.65 06/15/35 415bp -6bp
MEX 6 7/8 05/13/37 252bp +4bp
MEX 7 3/8 05/13/55 315bp +5bp
CHILE 5.65 01/13/37 145bp +4bp
PANAMA 6.4 02/14/35 290bp +2bp
CSNABZ 5 7/8 04/08/32 575bp -1bp
MRFGBZ 3.95 01/29/31 276bp -4bp
PEMEX 7.69 01/23/50 584bp +3bp
CDEL 6.33 01/13/35 199bp +1bp
SUZANO 3 1/8 01/15/32 164bp -4bp
FX Level Δ DoD
USDBRL 5.48 +0.06
USDCLP 943.39 +12.84
USDMXN 18.6 +0.02
USDCOP 4043.50 +56.50
USDPEN 3.56 +0.01
CDS Level Δ DoD
Mexico 105 2
Brazil 146 5
Colombia 216 12
Chile 54 3
CDX EM 97.54 (0.21)
CDX EM IG 101.24 (0.08)
CDX EM HY 93.68 (0.34)
Main stories recap:
Comments
Closing Comment
· U.S. stocks turned lower in reaction to President Trump unexpectedly sending out letters to assign tariffs to some key trading partners such as Japan, South Korea, South Africa and a variety of other Asian nations ahead of the July 9th deadline.
· U.S. Treasuries sold off as the USD strengthened but also due to the need to price in a concession to absorb USD119bn of 3s/10s/30s Treasury auction supply in the next three days.
· The EM primary market was active with one new Asia deal and two new CEEMEA issues priced. CEEMEA mandates lined up in the queue, but one wonders if market volatility will derail those plans. In LATAM, we had a drive-by two-part deal for rising star Republic of Guatemala with a tiny new issue concession and a 10s/30s credit spread curve of only 5bp.
· EM secondary market benchmark bond spreads widened 5-15bp in CEEMEA while in LATAM they were about 1-5bp wider.
· Some underperformers included high beta Argentina sovereign bond 10-year notes down ¾ point and Braskem corporate bonds down ¾ - 1 point.
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Historical bullets
JGB TECHS: (M5) Rallies Off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.19 @ 15:53 GMT Jun 06
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
We've just published our UST Issuance Deep Dive - Download Full Report Here
- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
