EM LATAM CREDIT: Mexico: Sheinbaum Holds Call with Trump
(MEX; Baa2neg/BBB/BBB-)
• Trump and Sheinbaum are set to hold a phone call this morning, as the countries look to seal a trade agreement ahead of the Friday deadline and the installation of a 30% tariff on Mexican exports to the US, according to sources.
• Economy Minister Ebrard and his team have been in Washington throughout this week - and the reports suggest that a team-level agreement has been made between Ebrard and Trump's cabinet - however it is up to the leadership to finalise any agreement and progress to the next phase. Reportedly, the Mexican team made "sincere and potentially persuasive proposals about how to rebalance trade", which could suggest a more favourable general tariff rate relative to other nations so far.
• Specific timing for the call is unclear, but Sheinbaum moved her usual daily press conference, the Mañanera Del Pueblo, from 0730 local time (1430BST) to 1000 (1700BST), which may suggest a time slot for her conversation with Trump.
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STIR: US Terminal Rate Seen Close To Post-Election Lows, Powell Panel Ahead
- Fed Funds implied rates are 0-1.5bp lower on the day for 2025 meetings, marginally shoring up a next cut in September whilst year-end expectations widen the gap with the median dot (68bp vs 50bp cuts pencilled in two weeks ago).
- Cumulative cuts from 4.33% effective: 5bp Jul, 28.5bp Sep, 47bp Oct, 68bp Dec, 80bp Jan and 95bp Mar.
- The SOFR implied terminal yield of 3.015% (SFRZ6, -1.5bp) last closed lower on Apr 29 and 30 (and before that pre-US election on Oct 2024) as it increasingly firmly prices five cuts for what’s left of the easing cycle.
- Today’s sole scheduled Fedspeak comes from Chair Powell speaking at the ECB’s Sintra conference. He’s on a panel with ECB’s Lagarde, BOE’s Bailey, BOJ’s Ueda and BOK’s Rhee at 0930ET.
- We have had limited major data releases since his congressional appearances last week, which in turn followed soon after the Jun 18 FOMC press conference, although Thursday did see surprisingly weak domestic demand revisions for Q1 before soft consumer spending in May on Friday.
- His House appearance saw treasuries rise and the USD pull back on headlines that appeared to suggest earlier rate cuts are possible "*POWELL: LOWER INFLATION, WEAKER LABOR COULD MEAN EARLIER CUT" (Bloomberg). However, the full context of this was that he was asked whether he concurs with Gov Waller about a potential path for "good news" to lead to rate cuts, Powell keeps the option conditionally open but not an unsolicited comment or an endorsement - and indeed he also notes potential for later cuts too.
- More broadly, Powell again implied that the September FOMC is the next live meeting.
ESM ISSUANCE: New 3-month ESM-Bill
| Type | 3-month ESM-bills |
| Maturity | Oct 9, 2025 |
| Amount | E1.098bln |
| Target | E1.1bln |
| Previous | E1.086bln |
| Avg yield | 1.930% |
| Previous | 1.956% |
| Bid-to-cover | 2.66x |
| Previous | 2.65x |
| Previous date | Jun 03, 2025 |
US 10YR FUTURE TECHS: (U5) Bull Cycle Extends
- RES 4: 114-14 High Apr 7 and key resistance
- RES 3: 113-07 76.4% retracement of the Apr 7 - 11 bear leg
- RES 2: 112-23 High May 1 and key resistance
- RES 1: 112-12/15 Intraday high / 61.8% of the Apr 7 - 11 sell-off
- PRICE: 112-10 @ 11:14 BST Jul 1
- SUP 1: 111-22 Low Jun 30
- SUP 2: 111-05+ 20-day EMA
- SUP 3: 110-28+ 50-day EMA
- SUP 4: 110-20 Low Jun 20
A bull cycle in Treasury futures remains intact and this week’s continuation higher reinforces current conditions. The contract is approaching the next important resistance at 112-15, the 61.8% retracement of the Apr 7 - 11 steep sell-off. Clearance of this level would expose 112-23, the May 1 high. Note that the uptrend is overbought, a pullback would unwind this position. First key support to watch is 111-05+, the 20-day EMA.
