EM LATAM CREDIT: United Mexican States (MEX; Baa2neg / BBB /BBB-) Fiscal Deficit
“Mexico Sees 2026 Public Deficit From 3.2% to 3.5% of GDP” – BBG
Neutral for spreads
• Mexico projects a reduction in the fiscal deficit from 5.7% in 2024 to 3.9% in 2025 then falling to 3.2-3.5% in 2026 which is in line with previous estimates.
• Forecasted real GDP was 2-3% previously and is now expected to be 1.5-2.3% which is a bit higher than the IMF’s GDP forecast of 1.4% in 2025.
• The IMF in their October 2024 report noted tight monetary policy as slowing growth as well as a need for a long-term plan for Pemex. Also suggested was tax reform to reduce the fiscal deficit.
• Pemex and the government announced February 12, 2025 a five-year plan for the company.
• Banxico has delivered two 50 bps reductions in the policy rate so far this year with more expected.
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EURJPY TECHS: Impulsive Rally Highlights A Possible Reversal
- RES 4: 161.35 61.8% retracement of the Dec 30 - Feb 10 bear leg
- RES 3: 161.19 High Feb 13
- RES 2: 159.65 50-day EMA and key short-term resistance
- RES 1: 158.36 Intraday high
- PRICE: 158.31 @ 07:34 GMT Mar 3
- SUP 1: 155.93/154.80 Intraday low Low Feb 28
- SUP 2: 154.42 Low Aug 5 ‘24 and key medium-term support
- SUP 3: 153.87 Low Dec 14 ‘23
- SUP 4: 152.72 1.00 proj of the Jan 24 - Feb 10 - 13 price swing
Today’s strong rally in EURJPY undermines a recent bearish threat and instead highlights a potential developing reversal. The cross has traded above the 20-day EMA and this signals scope for an extension towards resistance around the 50-day EMA, at 159.65. Note that a major support at 154.42, the Dec 14 2023 low, remains intact. A break of this level is required to reinstate a bear theme.
OPTIONS: Expiries for Mar03 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0245-50(E1.9bln), $1.0275-85(E658mln), $1.0470-75(E1.6bln)
- USD/JPY: Y150.79-00($1.1bln)
- AUD/USD: $0.6350-60($777mln)
- USD/CAD: C$1.4300($1.6bln), C$1.4350($1.1bln), C$1.4400($1.5bln), C$1.4425-40($1.9bln)
SCHATZ: Swap related trade
Large Schatz Swap related trade, suggest payer.
- DUH5 ~16k at 106.80.
