EM LATAM CREDIT: Nemak (TNEMAK; Ba2/BB+neg/BBB-neg): US Tariff Impact
“Tariffs Push Nissan to Halt US Orders for SUVs Built in Mexico” – BBG
Neutral for spreads
• Nissan paused new orders for two Infiniti model SUVs that are built in Mexico while Stellantis said it plans to halt some production coming from Mexico and Toyota said it was reducing hours at a factory in Mexico.
• North American sales were 53% of Mexican based auto parts manufacturer Nemak’s revenues. A reduction in North American sales and EBITDA of 25% would boost net debt leverage from 2.4x to 2.8x, all else being equal. Net leverage was 2.7x at the end of 2023.
• If US tariffs have a material impact on sales and margins that will delay deleveraging efforts and likely result in a downgrade by one or more agencies.
• The company has 38 plants in 15 different countries, specializing in powertrain engine blocks, cylinder heads and transmission parts with a very diversified portfolio of customers.
• TNEMAK 2031s were last quoted T+491bps, widening out from T+357bps at 2024-year end, with 125 bps of that widening coming in the past week.
• At 8.54% the bonds look interesting as a ratings downgrade appears to be priced in while the company’s business model seems solid in terms of customer and geographic diversification as well as moderate balance sheet leverage even after the tariff impact.
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US TSY OPTIONS: Corporate Bond Update: Republic of Armenia 10Y Launched
- Date $MM Issuer (Priced *, Launch #)
- 03/05 $Benchmark Mars 2Y +75a, 3Y +85a, 5Y +100a, 7Y +110a, 10Y +120a, 20Y +135a, 30Y +145a, 40Y +155a
- 03/05 $1.5B Axon 5NC2, 8NC3
- 03/05 $1B *KommuneKredit WNG 5Y SOFR+44
- 03/05 $750M #Republic of Armenia 10Y 7.1%
- 03/05 $500M Acadia Health 8NC3
- 03/05 $500M Forestar Group 8NC3
EURIBOR: Net Long Setting Dominated On Tuesday
OI data suggests net long setting dominated in Euribor futures on Tuesday, with some pockets of net short cover also seen across the strip.
- The largest net OI swing was seen in the M5 contract, where ~37k of indicative net longs were added.
- Notable options flow in M5 yesterday included:
- ERM5 98.12/98.25cs, bought for half in 6k.
- ERM5 98.125/98.3125cs, bought for 1 in 29k.
| 04/03/2025 | 03/03/2025 | Daily OI Change | Daily OI Change In Packs | ||
| ERH5 | 539,589 | 537,809 | +1,780 | Whites | +35,800 |
| ERM5 | 810,021 | 773,004 | +37,017 | Reds | +1,561 |
| ERU5 | 574,236 | 578,312 | -4,076 | Greens | +6,054 |
| ERZ5 | 606,392 | 605,313 | +1,079 | Blues | +1,372 |
| ERH6 | 434,644 | 430,992 | +3,652 | ||
| ERM6 | 339,883 | 335,585 | +4,298 | ||
| ERU6 | 258,203 | 267,402 | -9,199 | ||
| ERZ6 | 345,641 | 342,831 | +2,810 | ||
| ERH7 | 178,807 | 179,200 | -393 | ||
| ERM7 | 145,074 | 146,915 | -1,841 | ||
| ERU7 | 121,997 | 119,235 | +2,762 | ||
| ERZ7 | 129,178 | 123,652 | +5,526 | ||
| ERH8 | 63,149 | 58,970 | +4,179 | ||
| ERM8 | 46,783 | 46,142 | +641 | ||
| ERU8 | 32,985 | 35,713 | -2,728 | ||
| ERZ8 | 45,640 | 46,360 | -720 |
SWEDEN: Feb CPIF Preview: SEK Most Sensitive To Weaker-than-Expected Reading
Swedish February flash inflation is due at 0700GMT/0800CET tomorrow. As always, there are no details provided in the flash release, so the market reaction will hinge solely on the headline CPIF and CPIF ex-energy readings. Given the extent of the Swedish krona’s rally since the start of February, the risks to markets are likely skewed towards a weaker-than-expected print.
- NOKSEK notably breached multi-year support at 0.9500 on Monday, with bearish momentum reasserting itself this morning. Key support is the November 2020 low at 0.9274, while rallies short of the 20-day EMA at 0.9585 will be considered corrective. Meanwhile, USDSEK is down almost 5% this week, with solid support seen around 10.1500 and 10.0399 (Sep 27 low).
- There are mechanical upside risks to the Riksbank’s 2.4% Y/Y projection for February CPIF ex-energy, after the January inflation report was much stronger than expected. Analysts currently expect CPIF ex-energy inflation steady at 2.7% Y/Y.
- The January beat was due to a positive basket effect and solid underlying price pressures. The basket effect will be positive throughout the year, while analysts also do not expect a meaningful reversal of the underlying January drivers. Taken alongside strong PPI and survey-based expected price metrics in the last month, scope for a move back towards 2% in the near future appears limited.
- The Riksbank are widely expected to keep rates on hold on March 20, but the February inflation report will feed into expectations for the March MPR rate path.
- Headline CPIF is expected to increase 0.5pp to 2.7% Y/Y on the back of higher electricity prices (partially due to a base effect).
- See the image below for a selection of analyst comments:
