EM LATAM CREDIT: LATAM Credit Market Wrap
Source: Bloomberg Finance L.P.
Measure Level Δ DoD
5yr UST 3.77% 5bp
10yr UST 4.17% +3bp
5s-10s UST 40.7 -2bp
WTI Crude 65.2 +0.2
Gold 3750 +14.3
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 1225bp +94bp
BRAZIL 6 1/8 03/15/34 219bp -0bp
BRAZIL 7 1/8 05/13/54 311bp -1bp
COLOM 8 11/14/35 318bp +4bp
COLOM 8 3/8 11/07/54 384bp +4bp
ELSALV 7.65 06/15/35 372bp -1bp
MEX 6 7/8 05/13/37 218bp -4bp
MEX 7 3/8 05/13/55 272bp -2bp
CHILE 5.65 01/13/37 129bp -1bp
PANAMA 6.4 02/14/35 223bp +1bp
CSNABZ 5 7/8 04/08/32 492bp +7bp
MRFGBZ 3.95 01/29/31 222bp -3bp
PEMEX 7.69 01/23/50 464bp +3bp
CDEL 6.33 01/13/35 168bp -4bp
SUZANO 3 1/8 01/15/32 154bp -2bp
FX Level Δ DoD
USDBRL 5.36 +0.03
USDCLP 961.22 +8.43
USDMXN 18.5 +0.06
USDCOP 3905.52 +20.28
USDPEN 3.50 +0.00
CDS Level Δ DoD
Mexico 94 1
Brazil 138 3
Colombia 188 3
Chile 52 2
CDX EM 97.75 (0.10)
CDX EM IG 101.65 (0.09)
CDX EM HY 95.02 (0.09)
Main stories recap:
· Stronger than expected U.S. economic data, hawkish comments from Chicago Fed President Goolsbee and a USD44bn 7-year Treasury auction all conspired to trigger a bear flattener move of a 3-5bp rise in Treasury yields.
· Equities continued to correct with about a .5% decline as good economic news was bad news for the market with potentially less likelihood of further Fed rate cuts.
· The EM primary market was active again with 3 new deals and 1 mandate outstanding for CEEMEA while in LATAM we saw two Brazil corporate high yield niche issuers.
· Higher yielding LATAM sovereign and corporate names generally moved about 5-10bp wider with the risk off move in both equities and Treasuries while spreads of some higher rated issuers tightened a few bp as they outperformed Treasuries.
· Bonds of Brazil’s Braskem were lower, though the lowest dollar price bond on the curve, the 2050s, moved higher which could be explained by reports of banks demanding collateral against a revolving credit facility which could lower the recovery value for unsecured bond holders.
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ASIA: Coming Up In Asia Pac Markets On Wednesday
| 0130BST | 0830HKT | 1030AEST | Australia Westpac Leading Index |
| 0200BST | 0900HKT | 1100AEST | Australia 2035 Bond Sale |
| 0230BST | 0930HKT | 1130AEST | Australia July CPI |
| 0230BST | 0930HKT | 1130AEST | Australia Q2 Construction Work Done |
| 0230BST | 0930HKT | 1130AEST | China July Industrial Profits |
| 0300BST | 1000HKT | 1200AEST | South Korea July Retail Sales |
| 0501BST | 1201HKT | 1401AEST | Fed's Barkin Repeats Remarks On Economy |
Source: Bloomberg Finance L.P./MNI
FED: WSJ, BBG Sources Pieces Point To Further Trump Attempts To Shape Fed
Two separate articles published in quick succession Tuesday afternoon point to multiple angles being pursued by the Trump administration to exert more influence on the composition of the FOMC.
- Bloomberg's "Trump Team Is Weighing Options to Extend Influence to Fed Banks" (link) says that the Trump administration is "reviewing options for exerting more influence over the Federal Reserve’s 12 regional banks that would potentially extend its reach beyond personnel appointments in Washington, according to people familiar with the matter."
- From the Bloomberg piece: "The Board of Governors is next scheduled to authorize the current roster of reserve bank presidents in a once-in-five-year exercise in February... Several of the Fed’s regional presidents began to grow concerned earlier this summer about what Trump’s plans for the central bank could mean for their jobs, according to people familiar with the matter. The president’s announcement late Monday exacerbated those concerns, with presidents making a round of calls to each other about what Cook’s firing could mean for them, according to one person familiar with the matter."
- The Wall Street Journal's "Trump Weighs Quickly Announcing Nominee to Replace Lisa Cook on Fed Board" (link) cites "people familiar with the matter" as saying President Trump wants to "move quickly to announce a nominee" to succeed Cook.
- One potential candidate per the WSJ is ex-World Bank President David Malpass. He wrote in a WSJ op-ed last week that "One foundational change for the Fed would be anchoring its inflation-fighting policies in forward-looking, market-based data with a goal of defending the dollar and expanding its use as the world's reserve currency. There's no necessity for the current high level of interest rates and bond yields....Another foundational change for the Fed would be shrinking itself -- a move that's long overdue."
CANADA DATA: Manufacturing, Wholesale Trade Seen Continuing Recovery In July
StatCan estimates that both manufacturing and wholesale trade sales increased strongly in July, portending a continued recovery from a weak Q2.
- The manufacturing flash estimate is for 1.8% M/M growth, with the transportation equipment and petroleum/coal subsectors expanding the most.
- Manufacturing sales rose by 0.3% in June, for the first rise since January - a 1.8% July increase would be the best in 17 months, and raise the 3M/3M annualized rate to -11.7% from -18.0% (which followed outsized gains in Q1 that were partly tariff-front running related).
- For wholesale trade, StatCan estimates a 1.3% rise (ex-petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain), in large part reflecting gains in motor vehicle/motor vehicle parts and accessories sales.
- This wholesale category rose 0.7% M/M in June, the first rise since February. A 1.3% rise in July would help boost the 3M/3M annualized growth rate to -2.5% from -6.6% in June (again, reflecting giveback from a jump in Q2).
- We get the full reports and data on September 15, but the July data suggests that after a very negative quarter for both manufacturing / wholesale sales, there has been a nascent recovery.
