EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM
Measure Level Δ DoD
5yr UST 4.6% +13.7bp
10yr UST 4.8% +8.8bp
CDX EM 97.01 (0.13)
CDX EM IG 100.69 (0.08)
CDX EM HY 93.04 (0.19)
WTI Crude 76.6 +2.7
Gold 2689 +22.0
USDMXN 20.73 +0.22
USDBRL 6.10 +0.07
USDCLP 1012.1 +4.90
USDPEN 3.77 +0.01
USDCOP 4346 +13.65
Main stories recap:
Global liquid EM sovereign bonds both high grade and high yield were generally down .50 to 75 into the close, recovering about .25 from the gap lower post the stronger than expected US jobs report while corporate bonds were down about .25. Underperformers were names like SOAF, Romani and KSA in the long end that fell more than a point while Turkey 10 year bonds managed to only fall .30. In Latam, recently issued Codelco 10yr bonds were .45 lower than new issue pricing while new Mex 10s/30s were down .45 and .75 respectively and new Chile 12 yr fell .60 from issuance with almost all of those losses from new issue coming from today’s sell off. The new YPF 9 yr traded lower but unchanged from issuance, giving up gains from two days ago. The headline payroll number of +256k vs 160k expected and 4.1% vs 4.2% from the household survey triggered an immediate selloff in 10 year Treasuries of ¾ point and a point in the long end with liquid EM adjusting quickly while off the run high yield corporate bonds showed less correlation and outperformed.
VENZ - Venezuela closed the border with Colombia temporarily
Maduro sworn in for 3rd term, new sanctions announced
PANAMA - Panamanians rallied, marking the anniversary of the violent 1964 protests against the canal
COLOM - New poll shows Petro disapproval rises to 56%
ARGENT - * Poll shows Argentines more positive on Milei's Economy
* The Argentine govt modified regulations to make issuance of corp debt more efficient
RRRPBZ - Brava receives bid for onshore shallow water assets
MEX - Mexico to spend MXN8bn to remodel airport
BIMBOA - Bimbo to issue up to MXN15bn local bonds
BRAZIL - Brazil seeks ADNOC investment
GUATEM - Dec. remittances up 10% y/y
ELSALV - BofA downgrades Elsalv bonds post rally
CDEL - Nov Copper Output Up MoM and Y/Y
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CNH: USD/CNH Near 7.2800, PBoC-backed Paper States Yuan To Remain Stable
USD/CNH spiked from sub 7.2500 to above 7.2900 late in Wednesday Asia Pac trade, following a Rtrs report that China was considering a weaker yuan in 2025 to counter the tariff threat from the returning Trump administration. We track just under 7.2800 in early Thursday dealings, after losing 0.29% on Wednesday. Spot USD/CNY finished up at 7.2631, while the CNY CFETS basket tracked higher to 100.07 (up 0.38%) per BBG.
- The Financial News (which is backed by the PBoC) stated that the yuan has a solid foundation to remain basically stable late on Wednesday, per BBG. It noted that it may see volatility in both directions though (see this link).
- State banks were also reportedly USD sellers when onshore spot spiked above 7.2650 yesterday, per BBG.
- For USD/CNH, dips sub the 20-day EMA have been supported in recent sessions. This rate comes in around 7.2540. On the topside, recent highs rest above 7.2900.
- The local data calendar is quiet, although we still await the Nov aggregate finance, new loans data. The annual economic working group meeting is also expected to continue today.
- Late yesterday it was reported that the US Biden administration would put tariffs on import materials from China (per FT/BBG).
BONDS: NZGB Curve Twist-Steepens, Outperforming US Tsys
The NZGB curve has twist-steepened this morning, yields are -0.5bps to +1.5bps and is outperforming the moves made overnight in US tsys which sure yields rise 1 to 6.5bps.
- The Tsys curve bear steepened, with the short-end outperforming after in-line CPI data pointed to a Fed cut next week. Core CPI inflation was a little stronger than expected in November at 0.31% M/M (cons 0.28), but housing inflation - whose stickiness has been a concern for Fed policymakers - pulled back more sharply than expected, helping shift implied probability of a 25bp cut next week to near 100% versus <90% Tuesday.
- New Zealand's retail card spending remained flat in November, following a revised 0.7% increase in October. Total card spending declined 0.1% m/m after a revised 0.2% gain previously. Fuel outlet sales rose 1.3% m/m, while core sales edged up 0.1% m/m.
- With little on the data calendar locally, focus in the region today will now turn to Australia's employment data due out in a few hours, with consensus for a gain of 25k jobs, with the unemployment rate to edge up to 4.2% from 4.1%.
- The RBNZ dated OIS is steady this morning 43bps of cuts priced in for the Feb meeting, and a cumulative 108bps of cuts priced in through to October 2025.
- NZGB curves are trading just off their steepest levels for the year, the 3s10s steepened the most trading +3.3bps at 58.90 while the the 5s10s +2.5bps at 44bps.
- The 2yr is outperforming this morning and is now trading at its lowest yield since Sept 2022, last -0.2bps at 3.711%, while the 10yr is +1.3bps at 4.342% vs 2024 lows of 4.068%.
- Swaps are steady this morning, trading little changed.
- There will be a 2028, 2035 & 2037 bond auction later today.
NZD: NZD/USD Breaks 0.5800, Makes New Yearly Lows
- NZD/USD closed 0.24% lower at 0.5785 on Wednesday, making fresh new yearly lows in the process. The move lower has tracked a steep sell-off in China's yuan, after reports that China will consider letting its currency fall in 2025.
- The pair hovers near its two-year low at 0.5772, reflecting a bearish trend within a descending channel. It trades below all key EMAs, signaling bearish momentum, with the RSI nearing oversold territory at, currently at 36.
- Immediate support lies at 0.5772 (2023 lows), a break here and the next major support isn't until the 2022 lows at 0.5500. Resistance levels are seen at 0.5872 (20-Day EMA), a break above here and 0.5900 becomes the target.
- The OIS market has 43bps of cuts priced in for the Feb meeting in line with Wednesday. There is a cumulative 108bps of cuts priced in through to October 2025.
- The NZ-USD 2yr swap was steady on Wednesday after hitting a low of -60bps last week, before a slight bounce to hold at -53bps right now.
- New Zealand's retail card spending remained flat in November, following a revised 0.7% increase in October. Total card spending declined 0.1% m/m after a revised 0.2% gain previously. Fuel outlet sales rose 1.3% m/m, while core sales edged up 0.1% m/m.
- Later today we have some NZGB auctions. There is little else on the calendar today with focus turning to tomorrows BusinessNZ Manufacturing PMI
