EM LATAM CREDIT: Peru: Withdrawals from Pensions - Neutral
(PERU: Baa1/BBB-/BBB)
Workers will now be allowed to withdraw up to USD7.5bn equivalent, USD6,160 per individual after Congress passed a bill by a large majority. It is the 8th time since the pandemic that this has been permitted and 115bn soles (USD33bn) has been withdrawn since 2020. We could see short-lived impact on PEN denominated bonds and some minor impact on USD Peru sovereign and corporate bonds.
The last time this occurred was April 18, 2024 and we looked at the impact on the bond market as the concern was private pension plans would have to sell Peru PEN sovereign bonds (Soberanos) and Peru USD bonds to raise cash for the withdrawals.
There was an impact for about a month leading up to and through the time the bill was passed with first a widening then a tightening with Peru USD bonds (using Peru 34s as an example) initially widening about 20bps in the weeks leading into the announcement while Soberanos rose in yield about 50bps (using the 33s as an example) but then returning after a few weeks to where they were initially.
PERU 36s were last quoted T+105bp, roughly unchanged from last week and 20bp tighter since new issue pricing June 25, 2025. Peru 6.85% 2035 were last quoted 6.15% yield, up 17bp from a week ago but still 7bp lower in yield from Sept 1, 2025.
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US: Bessent Flags Investment Services Contribution to PPI
"BESSENT: BIG COMPONENT OF THIS MONTH'S PPI NUMBERS WAS INVESTMENT SERVICES, WHICH MEANS MARKET WENT UP A LOT" - Reuters
- Following the last PPI release, we wrote: "Our proxy for core PCE contributions from typically important PPI categories sees them adding 0.12pps to M/M core PCE in July after 0.03pps in June (hardly revised from 0.02pp prior).
- It's dominated by portfolio management & investment advice adding 0.10pps, on the back of a 5.4% M/M increase after a near unrevised 1.94%. M/M."
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Aug20 $1.1660-75(E1.3bln); Aug21 $1.1600(E1.3bln), $1.1700(E1.5bln), $1.1750(E1.9bln), $1.1800(E2.9bln)
- USD/JPY: Aug20 Y148.00-10($1.3bln); Aug21 Y145.95-00($1.2bln), Y146.70-80($1.7bln); Aug22 Y147.90($1.4bln)
- AUD/USD: Aug21 $0.6590-00(A$1.8bln)
OUTLOOK: Price Signal Summary - Bear Threat In Bunds
- In the FI space, Bund futures are trading closer to their recent lows. The contract traded sharply lower Friday resulting in a breach of 128.84, the Jul 25 low and bear trigger. Note that the 129.00 handle marks the base of a broad range and a clear range breakout would strengthen a bearish threat. This would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.93, is required to signal a reversal. Resistance at the 20-day EMA is at 129.64.
- Gilt futures traded sharply lower last Friday and yesterday’s sell-off confirmed a bearish start to the week, strengthening current conditions. The contract has breached key short-term support and a bear trigger at 91.08, the Jul 18 low. This signals scope for an extension towards 90.11, the May 22 low. On the upside, resistance to watch is seen at 91.99, the 50-day EMA. Clearance of this average is required to highlight a potential reversal. First resistance is 91.32, Monday’s high.
