EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.59% -6bp
10yr UST 4.08% -8bp
5s-10s UST 49.2 -2bp
WTI Crude 62.0 -1.5
Gold 3589 +43.5
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 1127bp +1bp
BRAZIL 6 1/8 03/15/34 243bp -2bp
BRAZIL 7 1/8 05/13/54 336bp -0bp
COLOM 8 11/14/35 340bp -18bp
COLOM 8 3/8 11/07/54 405bp -15bp
ELSALV 7.65 06/15/35 428bp +0bp
MEX 6 7/8 05/13/37 250bp -3bp
MEX 7 3/8 05/13/55 303bp -0bp
CHILE 5.65 01/13/37 139bp -3bp
PANAMA 6.4 02/14/35 258bp -1bp
CSNABZ 5 7/8 04/08/32 584bp +4bp
MRFGBZ 3.95 01/29/31 269bp +2bp
PEMEX 7.69 01/23/50 486bp -9bp
CDEL 6.33 01/13/35 206bp +2bp
SUZANO 3 1/8 01/15/32 179bp +1bp
FX Level Δ DoD
USDBRL 5.41 -0.03
USDCLP 966.08 -6.25
USDMXN 18.7 -0.03
USDCOP 3960.10 -27.71
USDPEN 3.52 -0.00
CDS Level Δ DoD
Mexico 96 (1)
Brazil 137 (0)
Colombia 183 (5)
Chile 49 (1)
CDX EM 98.14 0.05
CDX EM IG 101.52 0.03
CDX EM HY 94.69 0.07
Main stories recap:
· Treasury bull flattener rally with yields falling 5-9bp as U.S. labor market data disappointed with the August unemployment rate at 4.3%, the highest level in about four years.
· U.S. equity indexes took the news in stride with the bad news is good news theme persisting as the negative effect of weak economic data was offset by the higher probability and potentially larger magnitude of Fed rate cuts.
· The EM primary market took a breather after a very active week as is typical of Fridays. Secondary benchmark bond spreads in CEEMEA widened generally by single mid digits while higher beta names moved out low teens in z-spread terms.
· LATAM benchmark spreads were mixed with generally more liquid sovereign names tightening 2-3bp while relatively less liquid corporate bonds widened 2-4bp as they lagged the Treasury rally.
· Colombia sovereign bonds outperformed, tightening about 15bp as the results of a USD5bn bond tender were announced.
· Pemex outperformed, tightening 9bp, and at the end of the day was put on watch positive by Fitch.
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TARIFFS: US To Impose Additional 15% Tariff On Japan: Kyodo
Bloomberg citing Kyodo:
- "US TO IMPOSE ADDITIONAL 15% TARIFF ON JAPAN IMPORTS: KYODO"
- "US TARIFF ON JAPAN TO COME ON TOP OF EXISTING TARIFFS: KYODO"
- "KYODO CITES WHITE HOUSE OFFICIAL ON TARIFFS"
US: Trump White House Announcement Underway Shortly
US President Donald Trump is shortly due to make an announcement at the White House. LIVESTREAM There was speculation earlier in the day that the announcement could relate to new Russia sanctions or the open positions on the Federal Reserve Board of Governors and the Bureau of Labor Statistics.
- However, it appears the event will focus on a USD$100 billion investment pledge from tech giant Apple, which the White House described as a “significant acceleration” of Apple’s plan for more production in the United States.
- The New York Times notes: "The company said in February that it planned to spend $500 billion and hire 20,000 people in the United States over the next four years and open a factory in Texas to make the machines that power the company’s push into artificial intelligence. The company made similar, smaller pledges during the Biden administration and Mr. Trump’s first term, though it has not yet followed through on some of those promises."
FED: SF's Daly: Likely Need To Adjust Policy In Coming Months
SF Fed President Daly (non-2025/2026 FOMC voter) says in prepared remarks that "we will likely need to adjust policy in the coming months. Recalibrating it to match the collective risks to both of our mandated goals." Recall earlier this week she said in a Reuters interview that the Fed may need to cut more than twice by the end of the year.
- She notes that risks to the dual mandate goals of inflation and employment are "roughly balanced" but she's increasingly concerned about labor market weakness. "The labor market has softened. And I would see additional slowing as unwelcome, especially since we know that once the labor market stumbles, it tends to fall quickly and hard."
- "Inflation, absent tariffs, has been gradually trending down, and with a slowing economy and ongoing restrictive monetary policy, should continue to do so... Tariffs will boost inflation in the near term, but likely not in a persistent way that monetary policy would need to offset."
- She characterizes policy adjustments as "Recalibrating it to match the collective risks to both of our mandated goals", suggesting she doesn't see aggressive cuts.
