LATIN AMERICA: MNI EM Credit Market Wrap - LATAM (25 Mar)
Source: BBG
Measure Level Δ DoD
5yr UST 4.06% -3bp
10yr UST 4.31% -2bp
5s-10s UST 24.7 +1bp
WTI Crude 69.2 +0.1
Gold 3020 +9.1
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 928bp -4bp
BRAZIL 6 1/8 03/15/34 266bp +1bp
BRAZIL 7 1/8 05/13/54 351bp +2bp
COLOM 8 11/14/35 388bp +1bp
COLOM 8 3/8 11/07/54 469bp -0bp
ELSALV 7.65 06/15/35 447bp +4bp
MEX 6 7/8 05/13/37 266bp +1bp
MEX 7 3/8 05/13/55 324bp -1bp
CHILE 5.65 01/13/37 156bp +1bp
PANAMA 6.4 02/14/35 329bp +1bp
CSNABZ 5 7/8 04/08/32 533bp -9bp
MRFGBZ 3.95 01/29/31 294bp +2bp
PEMEX 7.69 01/23/50 646bp +2bp
CDEL 6.33 01/13/35 198bp +2bp
SUZANO 3 1/8 01/15/32 193bp +1bp
FX Level Δ DoD
USDBRL 5.71 -0.06
USDCLP 920.67 -7.17
USDMXN 20.1 +0.03
USDCOP 4107.14 -48.07
USDPEN 3.63 -0.02
CDS Level Δ DoD
Mexico 131 (1)
Brazil 181 (3)
Colombia 218 (1)
Chile 58 (2)
CDX EM 97.54 0.07
CDX EM IG 101.01 0.03
CDX EM HY 93.62 0.19
Main stories recap:
· Most benchmark bond spreads widened 2-3 bps across EM Asia, CEEMEA and Latam as US equity prices consolidated after yesterday’s stellar gains while US Treasuries rallied on weaker than expected US consumer confidence data.
· Asia and CEEMEA primary markets were active while Latam not so much with no new deals priced.
· Select Latam high yield corporate bonds that had been beaten up in past weeks outperformed with bonds of Chile telecom operator Telefonica Moviles Chile up more than 1 ½ points while bonds of Brazil vehicle leasing company Movida rose 1 ¼ points.
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GERMANY: Election Exit Polls Leave Some Uncertatinty On Coalition Possiilities
Exit polls on the German election so far leave some uncertainty on potential coalition outcomes, while the possibility of debt brake reform apperas likely as of now.
- Exit poll results stand at: CDU/CSU 28.9% (24.1% 2021), SPD 16.2% (25.1% '21), Greens 13.0% (14.8% '21), FDP 4.9% (11.5% '21), The Left 8.5% (4.9% '21), AfD 19.9% (10.3% '21), BSW 4.8% (new).
- Both FDP and BSW remain with some chances of gaining above 5% of votes ultimately - and would not get any Bundestag seats if they fail to do so as per a constitutional threshold.
- The "Grand Coalition" of centre-right CDU/CSU and centre-left SPD (which was seen as the most likely ahead of the election) would only have a Bundetag majority if both FDP and BSW will remain below named threshold. Current polls tilt towards that but leave some uncertainty.
- If pro-business FDP were to make it into Bundestag, that would make a "Germany" coalition (consisting of CDU/CSU, SPD and FDP) the most probable. Such a three-party coalition outcome would be seen to bring less stability to the government. Another option in that case would be the "Kenya" coalition (CDU/CSU, SPD and Greens) - which apperas rather unlikely, though, as CSU and Greens have partially opposing views.
- From a debt brake point of view, a 2/3rds Bundestag majority in favour of parties open for reform seems likely from current polls. However, the Left will likely be needed for such reform, and might push for some concessions from the governing parties then, complicating negotiations.
- More clear results are expected overnight.
STIR: July Fed Cut Priced Back In
The next Fed rate cut is again fully priced for the July meeting, following a 6bp futures-implied move today on the back of soft Services PMI data exacerbated in the afternoon by a risk-off move in equities.
- This comes following a run of mixed-at-best data (retail sales, housing starts, various consumer and business surveys) in the last week and is the first time a July cut has been priced since Feb 7 (just prior to January payrolls data) - previously it was priced for September.
- There's now almost two rate cuts priced through the end of the year (47bp through the December FOMC, an increase of 9bp on the day), the most seen since Feb 5.
- For the week, implied 2025 rate cuts have ranged between 35 and 48bp (the latter seen in the last hour of trade)
- See our US Macro Weekly for more on what to watch next week, with PCE and GDP the data highlights.
| Meeting | Current FF Implieds (%), LH | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) | Prior Session (Feb 20) | Chg Since Then (bp) | End of Last Week (Feb 14) |
| Mar 19 2025 | 4.32 | -1.5 | -1.5 | 4.32 | -0.9 | 4.32 |
| May 07 2025 | 4.25 | -8.4 | -6.9 | 4.28 | -3.1 | 4.28 |
| Jun 18 2025 | 4.14 | -19.4 | -11.0 | 4.18 | -4.2 | 4.18 |
| Jul 30 2025 | 4.07 | -26.2 | -6.8 | 4.13 | -6.0 | 4.13 |
| Sep 17 2025 | 3.97 | -35.7 | -9.5 | 4.04 | -6.5 | 4.04 |
| Oct 29 2025 | 3.92 | -41.2 | -5.5 | 4.00 | -8.0 | 3.99 |
| Dec 10 2025 | 3.86 | -47.3 | -6.1 | 3.95 | -8.8 | 3.93 |
US TSYS: Late Risk-Off Support Lends to Weak Data Support
- Treasuries look to finish near session highs Friday, second half support spurred by risk-off sentiment as wires recirculated report of a new Covid strain out of China with "pandemic potential" (SCMP).
- Tsy Mar'25 10Y futures climbed to 109-24 high (+18.5), still shy of initial technical resistance at 110-00 (High Feb 7 and the bull trigger); 10Y yield fell to 4.4042% low; curves mixed: 2s10s -1.123 at 22.205, 5s30s +.956 at 40.929. Heavy volumes (TYH over 3.3M tied to quarterly roll action, June takes lead next Friday).
- Early Treasury support triggered by weaker than expected data: flash S&P PMIs w/ composite at 50.4 (cons 53.2) after 52.7 in Jan, services (49.7 vs cons 53.0, after 52.9); and existing home sales were softer than expected in January at 4.08m (cons 4.13m) after an upward revised 4.29m (initial 4.24m). UofM data showed a worrying rise in long-term inflation expectations alongside a deterioration in consumer sentiment.
- US stocks fell hard, DJIA back to January 21 levels while SPX Eminis and Nasdaq withdrew to last Thursday lows. Trading desks also cited today's call weighted option expiration that has historically leaned toward bearish price action in the week after.
- Late weekend focus on German elections take focus over the weekend, before New Zealand retail sales and German IFO data cross. There is a public holiday in Japan Monday.
