LATAM: Summary – November 07
Nov-07 10:50
- On Friday, Chile will publish October CPI inflation and trade data, which will be followed by CPI inflation figures for Mexico as well. In the former, inflation is seen retuning to within the target range last month, while in Mexico, core inflation is expected to remain sticky above the 4% target range ceiling in October. Later today, Argentina will publish IP and construction activity figures for October, as well as the latest BCRA analyst survey.
- In the G10, Canadian labour market data later today is seen as a relatively stable month after a string of volatile prints. In the US, Michigan consumer sentiment and inflation expectations are scheduled ahead of NY Fed inflation expectations. The Fed's Jefferson and Miran are scheduled to speak next to a series of ECB speakers.
- The Yen has seen some moderate weakness this morning following Takaichi headlines saying the government's target achieving a primary balance surplus would no longer be reviewed on a single-year basis, adding to fiscal easing expectations. Combined with a modest firming of the dollar, this prompted a recovery for USDJPY to the 153.50 region.
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US TSYS: Lagging EGB Gains, 10Y Supply and FOMC Minutes Headline Docket
Oct-08 10:50
- Treasuries have extended yesterday’s gains, underperforming a stronger rally in EGBs on cautious political optimism with Italy and France leading gains.
- Today’s US docket is likely headlined by 10Y supply after a strong auction last month (yields are currently almost 7bps higher than last month’s high yield) as well as the FOMC minutes.
- Any sign of government shutdown progress will also be watched with Polymarket currently showing 74% chance of it ending Oct 15 or later.
- Cash yields are 0.2bp (2s) to 2.4bp (30s) lower on the day.
- The bull flattening sees 2s10s at 54.4b (-1.7bp), off yesterday’s almost month-long high of 58.2bp for back more firmly within recent ranges.
- TYZ5 trades at 112-25 (+03+) just off an earlier high of 112-25+, clearing yesterday’s 112-24 as it moves a little closer to resistance at 113-00 (Sep 24 high). Volumes are again very subdued at just 180k.
- Prior weakness was considered corrective, having yesterday probed support at 112-12+ (50-day EMA), with the trend structure remaining bullish.
- Data: Weekly MBA mortgage data (0700ET), Federal budget balance Sep (1400ET)
- Fedspeak: FOMC minutes (1400ET) plus Musalem (0920ET), Barr (0930ET), Goolsbee (1000ET & 1915ET), Kashkari (1515ET & 1630ET), Barr (1745ET) – see STIR bullet
- Coupon issuance: US Tsy $39B 10Y Note auction re-open - 91282CNT4 (1300ET). Last month’s auction was strong as it stopped through by 1.4bps and saw bid-to-cover rise from 2.35 to 2.65.
- Bill issuance: US Tsy $69B 17W bill auction (1130ET)
- Politics: Trump participates in roundtable on ANTIFA (1500ET)
JAPAN: Jiji-Komeito To Hold Talks w/Local Groups On Whether To Stay In Coalition
Oct-08 10:42
Jiji Press reports that the social conservative, centrist Komeito party will hold discussions on 9 October with its local organisations on the topic of whether the party should continue in its long-standing coalition agreement with the conservative Liberal Democratic Party (LDP). Jiji: "In light of the LDP faction's slush fund scandal, the Komeito Party is calling for a limit on the recipients of corporate and organisational donations. It is also calling for the full extent of the scandal to be clarified." New LDP President Sanae Takaichi is said to be considering the request, but has issued no comments on the issue yet.
- Speaking at an online event earlier today, Komeito leader Tetsuo Saito said, "we will hold discussions with great concern," adding, "Our party's supporters are also hoping for an answer that says, 'We can form a coalition without any hard feelings.'"
- Without Komeito's backing, the LDP could face a difficult challenge in confirming Takaichi as prime minister in an extraordinary Diet session on 15 October.
- The entire National Diet votes on PM candidates in a run-off system. There has been speculation that the opposition Constitutional Democratic Party, Japan Innovation Party and Democratic Party for the People could look to put forward their own candidate for PM. In the House of Representatives (which ultimately decides on the PM's identity), the combined seat total for these three parties stands at 213 to the LDP's 196, making Kometio's 24 seats potentially crucial in the face of a united opposition challenge.
US: Cracks Emerge In GOP Shutdown Strategy Ahead Of 6th Funding Vote In Senate
Oct-08 10:40
At 11:20 ET 16:20 BST, Senate Majority Leader John Thune (R-SD) will hold a sixth vote on the duelling Republican/Democratic government funding measures. Both bills are expected to fail with no change to the vote share.
- At 10:00 ET 15:00 BST, House Republican leadership will present a unified front at a press conference after House Minority Leader Hakeem Jeffries (D-NY) broadsided colleagues by declaring a bipartisan effort to extend Obamacare subsidies for one year a “nonstarter.”
- However, cracks in GOP strategy are emerging. Earlier this week, President Trump undermined GOP messaging by hinting at a bipartisan Obamacare deal. The White House has also offered mixed messaging on federal layoffs, threatening mass firings without issuing any reduction-in-force notices, and drawing rebukes from Johnson/Thune on reports the WH could deny backpay to furloughed workers.
- While no resolution appears imminent, pressure will mount in the coming days. Oct. 10, Federal workers will receive their last paychecks for September. On Oct. 13, fundraisers, local media events, and campaigning, during a planned Senate recess will be cancelled. Oct. 15, US troops, including active-service personnel, will miss paychecks. Within the next week or so, SNAP benefits for Women, Infants, and Children may run out of funding. On Oct. 20 and Oct. 31, respectively, Senate and House staffers will miss their first paychecks while lawmakers continue to be paid throughout.
- The implied probability of the shutdown extending to or beyond October 15 is 75%.
Figure 1: End Date of Govt Shutdown
Source: Polymarket
