EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.69% +0bp
10yr UST 4.22% +2bp
5s-10s UST 52.9 +2bp
WTI Crude 64.0 -0.6
Gold 3445 +28.1
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 1061bp -10bp
BRAZIL 6 1/8 03/15/34 240bp -1bp
BRAZIL 7 1/8 05/13/54 332bp -1bp
COLOM 8 11/14/35 357bp +1bp
COLOM 8 3/8 11/07/54 423bp +0bp
ELSALV 7.65 06/15/35 419bp -2bp
MEX 6 7/8 05/13/37 246bp +1bp
MEX 7 3/8 05/13/55 297bp -0bp
CHILE 5.65 01/13/37 141bp +0bp
PANAMA 6.4 02/14/35 267bp -1bp
CSNABZ 5 7/8 04/08/32 570bp +0bp
MRFGBZ 3.95 01/29/31 267bp +1bp
PEMEX 7.69 01/23/50 520bp -5bp
CDEL 6.33 01/13/35 201bp -1bp
SUZANO 3 1/8 01/15/32 176bp -1bp
FX Level Δ DoD
USDBRL 5.42 +0.01
USDCLP 966.70 -1.15
USDMXN 18.7 +0.00
USDCOP 4020.98 -6.37
USDPEN 3.53 -0.01
CDS Level Δ DoD
Mexico 96 0
Brazil 137 (0)
Colombia 193 0
Chile 51 0
CDX EM 98.07 (0.05)
CDX EM IG 101.45 (0.02)
CDX EM HY 94.60 (0.04)
Main stories recap:
· Consensus print on U.S. Core PCE, the Fed’s preferred inflation gauge, led to a steepening in the U.S. Treasury curve as the data increased the probability of a Fed rate cut next month.
· Profit taking in the tech sector led the decline in U.S. equity index prices.
· EM secondary market benchmark bond spreads exhibited little change going into month end.
· In LATAM, Braskem bonds were winners today, up a point today on news reports that Brazil government-controlled energy company Petrobras approved of a plan proposed by investment fund IG4 and Brazil banks which would include greater involvement by Petrobras in decision making.
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Historical bullets
US TSYS: Late Chairman Powell Presser React
- Treasury futures are extending lows now, curves bear flattening as projected rate cuts into year end continue to cool.
- Futures extending past this morning's ADP/GDP/Core-PCE lows: Sep'25 10Y futures currently trades -12 at 110-31.5 (110-31 low, 111-14.5 high). Key support is 110-08+, the Jul 14 and 16 low. Clearance of this level would reinstate a bearish theme. First support is at 110-19+, the Jul 24 low.
- Curves shift to flatter: 2s10s -1.814 at 43.131, 5s30s -1.397 at 94.131.
- Cross asset: Stocks retreating (SPX eminis -26.0 at 6380.25), Gold weaker at 3279.0, Bbg US$ index remains bid: 1218.77 (+8.79).
FED: Powell Implies A Fairly Extended Timeline For Tariff Clarity
Powell's commentary today on tariff passthrough to inflation continues to suggest a fairly extended timeline to achieve clarity:
- "What we see now is basically the very beginnings of whatever the effects turn out to be on goods inflation. And you know, I'll say again, they may be less than than people estimate, or more than people estimate. They're not going to be zero."
- And yet, "Inflation, we were very close to 2%. We're seeing some goods inflation move us away, but so far, not very far away."
EURUSD TECHS: Reversal Extends
- RES 4: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1851 High Sep 10 2021
- RES 2: 1.1789/1829 High Jul 24 / 01 and the bull trigger
- RES 1: 1.1663 20-day EMA
- PRICE: 1.1455 @ 19:48 BST Jul 30
- SUP 1: 1.1454 Low Jul 30
- SUP 2: 1.1431 23.6% retracement of the Feb 3 - Jul 1 bull cycle
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
EURUSD maintains a softer tone and traded lower again Wednesday. This week’s bearish price action has resulted in a move through key support at the 50-day EMA, at 1.1560. A clear break of this EMA would highlight a stronger reversal and the start of a correction. Scope is seen for a move towards 1.1431, a Fibonacci retracement. Note that medium-term trend indicators continue to highlight an uptrend. The bull trigger is 1.1829, the Jul 1 high.
