EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (04 Apr)
Source: BBG
Measure Level Δ DoD
5yr UST 3.70% -2bp
10yr UST 3.98% -5bp
5s-10s UST 27.6 -2bp
WTI Crude 62.2 -4.7
Gold 3025 -90.0
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 1119bp +72bp
BRAZIL 6 1/8 03/15/34 297bp +8bp
BRAZIL 7 1/8 05/13/54 397bp +16bp
COLOM 8 11/14/35 447bp +25bp
COLOM 8 3/8 11/07/54 529bp +24bp
ELSALV 7.65 06/15/35 556bp +31bp
MEX 6 7/8 05/13/37 296bp +9bp
MEX 7 3/8 05/13/55 360bp +11bp
CHILE 5.65 01/13/37 178bp +7bp
PANAMA 6.4 02/14/35 372bp +17bp
CSNABZ 5 7/8 04/08/32 665bp +48bp
MRFGBZ 3.95 01/29/31 377bp +33bp
PEMEX 7.69 01/23/50 737bp +40bp
CDEL 6.33 01/13/35 238bp +9bp
SUZANO 3 1/8 01/15/32 245bp +13bp
FX Level Δ DoD
USDBRL 5.84 +0.21
USDCLP 978.55 +28.87
USDMXN 20.5 +0.56
USDCOP 4274.46 +118.92
USDPEN 3.68 +0.02
CDS Level Δ DoD
Mexico 151 11
Brazil 201 11
Colombia 266 30
Chile 73 10
CDX EM 96.15 (0.72)
CDX EM IG 99.90 (0.39)
CDX EM HY 90.07 (1.11)
Main stories recap:
· Global equity prices fell about 5% which led to a flight to quality rally in US Treasuries and a major widening in bond spreads.
· EM Asia led the way with benchmark bond spreads about 3-8bps wider, followed by EM CEEMEA moving out 15-30 bps wider in the more defensive names and then LATAM benchmarks wider by 5-10 bps in higher quality.
· High yield bonds behaved worse with names in CEEMEA like Zambia and Angola sovereign bonds 4 points lower and in LATAM some illiquid high yield corporate bonds fell 2-3 points.
· In LATAM high yield sovereign bonds, Argentina fell nearly 2 points while government controlled YPF fell 3 points, weighed down by a 6% drop in oil prices. Colombia and state-controlled oil company Ecopetrol also fell about 1 ½ - 2 ½ points while bonds of Mexico owned Pemex dropped 2 points.
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Historical bullets
US TSYS: Late SOFR/Treasury Option Roundup
Option desks reported better SOFR & Treasury call volume on net Wednesday, with some chunky put structure selling and consistent vol selling on the day. Underlying futures weaker, near late lows as risk-off tone consolidates slightly on US auto tariff on Canada & Mexico delayed, trade talks ongoing. Projected rate cuts through mid-2025 recede from morning levels (*) as follows: Mar'25 at -2.2bp, May'25 at -10.6bp (-12.2bp), Jun'25 at -27bp (-29.2bp), Jul'25 at -36.2bp (-39.8bp).
- SOFR Options:
- +2,000 2QM5 96.37 straddles 49.5 ref 96.40
- -3,000 3QZ5 96.50/96.75 call strip, 46.5 vs. 96.28/0.68%
- -5,000 0QK5 96.62/96.93 call spds 8.0 ref 96.50
- Block/pit, -30,000 SFRM5 95.50/96.00/96.50 put flys, 26.0 vs. 96.005/0.10%
- -10,000 0QH5 96.06/96.31 1x2 call spds, 1.0 to 0.5 ref 96.62
- -2,000 SFRM5 95.93 straddles 27.0 ref 96.005/0.14%
- Block/screen +8,000 SFRZ5 95.50 puts, 3.5
- -2,000 SFRZ5 96.37 straddles 68.5 ref 96.41
- -2,000 SFRM5 96.00 straddles 29.0 ref 96.00
- +10,000 0QM5/0QU5 97.50 call spds 5.25
- +10,000 0QM5 97.00/97.50 call spds, 6.5 ref 9651
- Block, 3,000 0QM5 95.81.96.06.96.31 put flys, 4.0 vs 96.425
- Block, 8,000 0QK5/0QQ5 95.62 put strips, 2.0
- 2,000 SFRZ5 95.43/95.62/95.81 put flys ref 96.375
- 3,000 0QH5 96.75/97.00 call spds ref 96.42
- 4,000 2QM5 96.50/97.00 call spds ref 96.39
- 2,500 SFRZ5 96.12/96.37 call spds ref 96.355
- 1,750 0QK5 96.50/97.00/97.25 broken call flys ref 96.47
- Treasury Options:
- -5,000 TYJ5 110.75/111.25 strangles, 106
- Block, 12,500 TYK5 113.5 calls, 19 vs. 111-02.5/0.22% total volume over 105,000
- 85,000 TYK5 113.5 calls blocked at 21 vs. 111-03.5/0.22% at 0750:00ET followed by just over 97,000 TYK5
- 13.5 calls on the screen ref 111-02 to -03 as market makers likely unwind the initial cross.
- 2,000 FVM5 109/110 call spds ref 107-28.75
- 5,000 USK5 112/125 strangles ref 117-29
- over 5,500 USJ5 119 calls, 50 last
- over 5,100 USJ5 120 calls, 31 last
- 2,000 USJ5 114.5/115.5 put spds ref 117-23
- appr +20,000 TYJ5 109.75/112.5 combos on 1:1 ratio, +c 0.0-1 in pieces followed Block
- Block, -10,000 TYJ5 109.75/112.5 3x2 combo, 11 net/put sold over vs. 110-31.5/0.57%
EURJPY TECHS: Has Pierced Resistance At The 50-Day EMA
- RES 4: 162.70 High Jan 28
- RES 3: 161.80 High Jan 30
- RES 2: 161.19 High Feb 13 and a bull trigger
- RES 1: 160.53 High Mar 5
- PRICE: 160.12 @ 15:01 GMT Mar 5
- SUP 1: 157.98 20-day EMA
- SUP 2: 155.60 Low Mar 4
- SUP 3: 154.80 Low Feb 28 and a bear trigger
- SUP 4: 154.42 Low Aug 5 ‘24 and key medium-term support
This week’s strong rally in EURJPY undermines a recent bearish threat and instead highlights a possible reversal. The cross has again traded higher, today, and pierced resistance at the 50-day EMA, at 159.52. A clear break of the EMA would strengthen a bull theme and expose the key resistance at 161.19, the Feb 13 high. Initial support to watch is 157.98, the 20-day EMA. Key support has been defined at 154.80, the Feb 28 low.
COMMODITIES: Copper Surges On Tariff Threat, WTI Extends Losses
- Copper has rallied by an impressive 5.5% today, driven by President Trump’s threat to impose a 25% tariff on copper imports in his speech to Congress yesterday.
- The move is the largest one-day dollar and percentage gain in copper since November 2022, bringing the red metal up to $481/lb, the highest level since Feb 14.
- Copper futures remain in a bull cycle, with next resistance seen at $488.50, the Feb 14 high, followed by $500 round number resistance.
- Meanwhile, spot gold remains broadly unchanged at $2,920/oz, less than $40 below last week’s record high, amid hope of a tariff deal between the US, Mexico and Canada.
- Reuters has reported that the US will give a one-month exemption on any autos coming through USMCA.
- Gold remains 2% higher on the week, and a stronger rally would refocus attention on the next objective at $2,962.2, a Fibonacci projection. This would also open the $3,000.0 handle.
- In contrast, WTI has fallen further today amid oversupply concerns from OPEC’s returning barrels, rising US crude stocks, and fears of weaker global demand due to increased trade protectionism.
- WTI Apr 25 is down by 3.0% at $66.2/bbl.
- US crude inventories rose by 3.6m bbl, driven by a decline in refinery runs and despite a small drop in imports, while exports held above 4mb/d.
- Recent weakness in WTI futures has confirmed a resumption of the downtrend that started Jan 15, paving the way for an extension towards $65.68 next, the Oct 29 ‘24 low.
