EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (02 Jun)
Source: BBG
Measure Level Δ DoD
5yr UST 4.00% +4bp
10yr UST 4.44% +4bp
5s-10s UST 43.7 +0bp
WTI Crude 63.1 +2.4
Gold 3381 +91.4
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 864bp -3bp
BRAZIL 6 1/8 03/15/34 265bp -0bp
BRAZIL 7 1/8 05/13/54 370bp -2bp
COLOM 8 11/14/35 405bp -4bp
COLOM 8 3/8 11/07/54 497bp -3bp
ELSALV 7.65 06/15/35 449bp -4bp
MEX 6 7/8 05/13/37 275bp -2bp
MEX 7 3/8 05/13/55 340bp -1bp
CHILE 5.65 01/13/37 152bp -2bp
PANAMA 6.4 02/14/35 333bp -2bp
CSNABZ 5 7/8 04/08/32 576bp -4bp
MRFGBZ 3.95 01/29/31 282bp -6bp
PEMEX 7.69 01/23/50 661bp -12bp
CDEL 6.33 01/13/35 217bp -4bp
SUZANO 3 1/8 01/15/32 208bp -4bp
FX Level Δ DoD
USDBRL 5.67 -0.05
USDCLP 939.29 -6.38
USDMXN 19.2 -0.23
USDCOP 4159.43 +38.80
USDPEN 3.62 +0.00
CDS Level Δ DoD
Mexico 117 (3)
Brazil 158 (4)
Colombia 227 (4)
Chile 58 (2)
CDX EM 96.95 0.16
CDX EM IG 101.00 0.08
CDX EM HY 92.80 0.21
Main stories recap:
Comments
· U.S. equities closed marginally higher, shrugging off President Trump’s proposed hike in steel and aluminum tariffs from 25% to 50%.
· US Treasuries sold off with yields climbing 4bps across the curve. U.S. economic data was reported weaker than expected, but prices paid in the purchasing managers index survey remaining elevated.
· Oil prices moved 4% higher despite an announcement by Saudi Arabia led OPEC to hike output again. An escalation of attacks by both Ukraine and Russia that could potentially take oil inventory off the market if installations are affected as well as talk of new restrictions on buying Russian oil were blamed for the spike in oil prices today.
· The EM primary market heated up with a couple of new mandates announced in CEEMEA and three new mandates announced for LATAM.
· Secondary market benchmark USD bond spreads were quoted with a change of -10/+10bps in CEEMEA while in LATAM spreads were generally 2-4bps tighter.
· With the rise in oil prices, Pemex outperformed as bonds moved ½ point higher despite a selloff in U.S. Treasuries.
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Historical bullets
USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
