MEXICO: Scotiabank Trims Year-End Banxico Policy Rate Forecast To 8.25%
Mar-26 16:58
- Ahead of a widely expected 50bp rate cut tomorrow, Scotiabank notes that most Banxico members have shown a clear dovish bias, arguing that the current level of headline inflation warrants a less restrictive rate. Additionally, comments from several members point to the impact of economic sluggishness on prices as one of the main reasons for larger rate cuts.
- Recent data suggest that economic weakness at the beginning of the year will be more pronounced than initially expected. Confidence is being undermined by trade policy uncertainty, while construction and manufacturing have both shown more weakness amid mounting risk aversion among investors. As a result, concerns about a technical recession in the economy are starting to gain traction.
- In light of Banxico’s dovishness, Scotia have slightly lowered their year-end interest rate forecast to 8.25%, from 8.50%, with a downward bias. They believe that sluggish growth and inflation below 4.0% will continue to drive larger cuts. Thus, the focus will be on the tone of the statement, along with possible updates to inflation expectations, as these two factors will be important to gauge whether Banxico cuts by 25 or 50bp at its next meeting in May.
- Looking ahead, despite Banxico’s dovish stance, the lower rate differential between Mexico and the US, along with upside risks to the inflation outlook, will be key factors for keeping Banxico in restrictive territory at year-end.
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ITALY AUCTION PREVIEW: On offer this week
Feb-24 16:56
MEF has announced it will be looking to sell the following at its auction this Thusday, February 27:
- E3.25-3.75bln of the new 2.95% Jul-30 BTP (ISIN tba, in line with our expectations)
- E2.5-3.0bln of the 3.65% Aug-35 BTP (ISIN: IT0005631590)
- E2.5-2.75bln of the 1.10% Apr-33 CCTeu (ISIN: IT0005620460)
STIR: BLOCK: June'25 SOFR Ratio Call Spread
Feb-24 16:55
- 1,250 SFRM5 95.87/96.00 4x5 call spds, 4.0 net (4-leg over), vs. 95.865/0.26% at 1148:16ET
US 10YR FUTURE TECHS: (H5) Key Resistance Remains Exposed
Feb-24 16:42
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg
- RES 2: 110-14 High Dec 14
- RES 1: 109-28+/110-00 High Feb 24 / 7 and the bull trigger
- PRICE: 109-25 @ 16:32 GMT Feb 24
- SUP 1: 108-21+ Low Feb 19
- SUP 2: 108-04/00 Low Feb 12 / Low Jan 16
- SUP 3: 107-06 Low Jan 13 and the bear trigger
- SUP 4: 107-04 Low Apr 25 ‘24 and a key support
Treasury futures are building on the recent recovery. The resumption of the move higher exposes the next important resistance and a bull trigger at 110-00, the Feb 7 high. Clearance of this level would strengthen a bullish theme and open 110-19, a Fibonacci retracement. On the downside, key short-term support has been defined at 108-04, the Feb 12 low. Clearance of this support would reinstate a bearish theme.
