EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.98% +3bp
10yr UST 4.41% +3bp
5s-10s UST 42.6 +1bp
WTI Crude 68.4 +0.4
Gold 3304 -32.1
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 910bp +8bp
BRAZIL 6 1/8 03/15/34 246bp +0bp
BRAZIL 7 1/8 05/13/54 348bp +1bp
COLOM 8 11/14/35 404bp +3bp
COLOM 8 3/8 11/07/54 476bp +8bp
ELSALV 7.65 06/15/35 417bp +2bp
MEX 6 7/8 05/13/37 254bp +1bp
MEX 7 3/8 05/13/55 317bp +1bp
CHILE 5.65 01/13/37 147bp +2bp
PANAMA 6.4 02/14/35 291bp -0bp
CSNABZ 5 7/8 04/08/32 571bp -4bp
MRFGBZ 3.95 01/29/31 273bp -3bp
PEMEX 7.69 01/23/50 591bp +6bp
CDEL 6.33 01/13/35 198bp -2bp
SUZANO 3 1/8 01/15/32 166bp +1bp
FX Level Δ DoD
USDBRL 5.45 -0.04
USDCLP 941.86 -1.39
USDMXN 18.6 -0.06
USDCOP 4050.75 +7.25
USDPEN 3.55 -0.02
CDS Level Δ DoD
Mexico 104 0
Brazil 146 1
Colombia 220 5
Chile 55 1
CDX EM 97.54 (0.01)
CDX EM IG 101.25 0.01
CDX EM HY 93.70 0.01
Main stories recap:
Comments
Closing Comment
· Equity indexes trended lower while U.S. Treasury yields moved higher as President Trump announced a 50% tariff on copper imports and plans to raise pharmaceutical tariffs as well.
· The EM primary market remained active despite the heightened tariff risk with Asia printing one financial while CEEMEA offered 2 new issues and a sovereign mandate.
· The EM secondary market was off to a good start in Asia with benchmark bond spreads tightening a few bp but more mixed in CEEMEA with a -5/+5 move and then wider for Latam in a +1-8bp range.
· Bonds of Brazil chemical company Braskem underperformed moving about a point lower with businessman Nelson Tanure seeking approval from regulatory authorities to proceed with his bid for a large stake in the company.
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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.
