MEXICO: Mexico's Finance Minister Amador: Outlook on Economy

Frenetic session for rates trading, early SOFR & Treasury options started off with better upside call trade - rotated to puts after Pres Trump raised China tariff to 125% effective immediately, while granting 90 day pause for 75 other countries and lowering the reciprocal tariff lvl to 10%. Clarity still needed on who is in the pause group. Underlying futures remain under -- most notable for Tsys is the swing in curves - from new 3 year highs overnight (2s10s tapped 73.847) to 44.835 at the moment (38.225 low). Projected rate hike pricing retreats: current levels vs. this morning (*) as follows: May'25 at -6bp (-13.4bp), Jun'25 at -22bp (-37.9bp), Jul'25 at -38.9bp (-61.4bp), Sep'25 -54.6bp (-79.3bp). Year end projection of 75bp total rate cut vs. full point this morning.

• SOFR Options:
  • Block, 5,000 SFRM5 95.62/95.75 put spds 1.0 over 96.00/96.12 call spds ref 95.915
  • Block, 48,000 SFRM5 96.25/96.87 call spds 9.0-8.5 ref 96.10 to -.095
  • -6,000 SFRM5 96.25 calls, 18.0 vs. 96.105/0.40%
  • +70,000 SFRM5 97.50/98.50 call spds 3.0-3.25 ref 96.10
  • Block/screen +57,000 SFRM5 96.50/97.25 call spds 6.5-7.0 ref 96.125 to -.10
  • +10,000 SFRM5 95.68/95.75/95.81 put flys, 0.75 ref 96.10
  • -5,000 0QM5 96.75/97.00/97.25 2x2x1 call flys, 12.0 ref 9684
  • +4,000 2QM5 96.43 puts vs 3QM5 96.25 puts, 3.5 net db/Blue Jun over
  • 9,000 0QK5 98.00 calls, 3.0 ref 96.86
  • Block, 7,500 2QJ5 96.43 puts, 2.5 ref 96.675
  • Block, 3,000 SFRU5 97.50/98.50 2x3 call spds, 10.5 ref 96.50
  • 2,000 SFRH6 94.62/95.62 put spds ref 96.825
  • 2,000 SFRM5 95.75/95.93/96.18/96.38 call condors ref 96.12
  • over 8,100 SFRJ5 96.00 calls, 18.0 last ref 96.115
  • 4,500 SFRU5 96.50/97.00 call spds ref 96.435
  • 2,000 0QK5/2QK5 97.25 call spds
  • 2,000 SFRM5 96.75/97.50 call spds vs. 2QM5 97.50/98.25 call spds
  • 2,000 SFRM5 95.75/95.81/95.88 put trees ref 96.085
  • Block/screen, 13,000 SFRM5 96.50/97.25 call spds ref 96.125
  • Block, 5,000 SFRK5 95.81/95.93/96.00/96.06 broken call condors, 5.0 ref 96.155
  • Block, 4,000 SFRM5 95.62 puts, 1.0 ref 96.18
• Treasury Options:
  • Block, 30,000 TYK5 108.5 puts 11 vs. 110-11/0.02%
  • 4,500 USK5 115/117 call spds, 48 ref 113-22
  • 20,000 FVM5 110/111.5/113 call flys, 2 ref 108-04.25 to -05
  • 3,500 FVM5 110.5/111 call spds ref 108-07
  • 10,000 FVK5 106.25/106.5/107/107.25 put condors ref 108-04.25
  • 2,000 wk3 TY 110.75/112 strangles ref 110-22 (exp 4/17)
  • over 4,600 TYM5 112 calls, 60 ref 110-24
  • 6,000 UXYM5 109/110 put spds ref 112-12
  • 4,000 UXYM 112/113 put spds ref 112-12
  • over 10,300 USK5 113 puts, 143 last
  • over 11,000 USK5 116 calls, 131 last
  • 5,200 USK5 117/120 call spds, 25 ref 114-12 to -11
  • over 6,000 TYM5 112.5 calls, 50 last ref 110-30.5 to -31
  • 1,000 TYK5 112.5/113.5/114.5/116.5 broken call condors ref 110-27
  • 1,300 FVM5 107/107.5 put spds, 13 ref 108-08
  • 2,500 TYK5 112/113 call spds ref 110-26

Gilts continued to sell off Wednesday, badly underperforming Bunds.

• Bunds remained relatively steady vs global counterparts during most of the session's trade, which was dominated by risk on / risk off considerations with regard to US tariffs.
• Gilts remained under extreme pressure, especially at the long end with no particular driver on the day for outperformance, though long-term UK fiscal concerns appeared to remain front-of-mind.
• But there was a sharp sell-off in Bund futures after the European cash close as US President Trump announced that all countries except China would be subject to a 10% universal tariff amid a 90 day pause on the higher "Liberation Day" reciprocal tariffs.
• For Thursday's cash session, the German curve bull steepened sharply, with the UK's bear steepening.
• Periphery/semi-core EGB spreads widened sharply - though this move looks likely to reverse upon Thursday's open if the equity rebound holds.
• Thursday's schedule includes an MNI event with BOE's Breeden, and Italian industrial production data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 11bps at 1.725%, 5-Yr is down 7.2bps at 2.102%, 10-Yr is down 4bps at 2.591%, and 30-Yr is down 5.7bps at 2.965%.
• UK: The 2-Yr yield is up 2.7bps at 3.991%, 5-Yr is up 9.4bps at 4.221%, 10-Yr is up 17.4bps at 4.779%, and 30-Yr is up 23.3bps at 5.58%.
• Italian BTP spread up 6.5bps at 129.1bps / Greek up 6.5bps at 97.6bps

• We include apparel in the summary section of the MNI US CPI Preview (here) as around 30% of end-use US imports are from China and apparel forms about 2.5% of the total CPI basket.
• Analysts expect a moderation to 0.3% M/M after 0.6% M/M. It’s a noisy category and so should be taken with caution but we’ll nevertheless watch it closely.
• Other areas to watch for initial passthrough before potentially much larger increases feedthrough in months ahead after a lurch higher in tariff rates include cell phones, computers and related accessories and electrical apparatus.  
• The below table is a useful guide of what areas to watch, with the US tariff on China jumping from 20% in March to an announced 104% earlier this week (after China retaliation) and now 125% after today's latest announcement from US President Trump.