LATAM: US Treasury Sec Lauds Argentinian Gov't Amid Push For Regional Influence

• RES 4: 106.975 High Dec 1 
• RES 3: 106.945 High Dec 3 and a key short-term resistance 
• RES 2: 106.885 Low Dec 2   
• RES 1: 106.835 High Dec 8  
• PRICE: 106.670 @ 14:24 GMT Dec 10
• SUP 1: 106.630 Intraday low  
• SUP 2: 106.621 2.236 proj of the Nov 26 - Dec 2 - 3 minor price swing
• SUP 3: 106.600 2.382 proj of the Nov 26 - Dec 2 - 3 minor price swing
• SUP 4: 106.583 2.500 proj of the Nov 26 - Dec 2 - 3 minor price swing 

A sharp sell-off in Schatz futures last week and an extension this week, confirms a continuation of a bear cycle that started mid-October.  Note that on the continuation chart, MA studies are in a bear-mode position, highlighting a dominant downtrend. Sights are on 106.621 next, a Fibonacci projection. Key short-term resistance has been defined at 106.945, the Dec 3 high. A corrective bounce would allow an oversold trend condition to unwind.

Core global FI markets have stabilised off session lows after demand came in around round number yields in 10-Year Tsys and Bunds (4.20% & 2.90%). 

• Softer-than-expected U.S. ECI data will have also provided some demand.
• Fresh downside in crude oil could be providing some modest cross-market support in recent trade, but recoveries in Tsys & EGBs remain tepid at best at this stage, after the recent run of hawkish repricing in EUR short end drove a meaningful adjustment in global yields in the first half of the week.
• North American central bank decisions are set to dominate during the remainder of the session.

Buxl swap spreads & ASWs have been resilient during this week’s sell off in bonds and trade little changed on the week. Hawkish ECB repricing in the short end has translated into a fairly uniform shift higher in both long end bond yields and swap rates.

• Note the resilience in spreads also comes despite some flattening on the EUR 10s30s curve, which is largely being attributed to potential liquidation in steepener positions, a widely favoured position centred on the impending transition of the Dutch pension fund sector (which will generate the liquidation of long end received positions).
• The DFA annual issuance plan presents a domestic focal point and is due to be released on Thursday of next week. Our issuance team will outline expectations ahead of that event.