LATAM: Week Ahead: Tariffs, BanRep Rate Decision, Chile Activity, Peru CPI
Mar-28 17:57
- While attention will be on tariff developments in the early part of the week, ahead of the April 2 deadline, BanRep’s monetary policy decision will also be of note on Monday. Following recent political developments, expectations have shifted towards a further pause in the easing cycle, although the vote is likely to be very close, and a cautious 25bp cut remains a possibility. On the data front, Chile economic activity (Tues), Peru CPI inflation (Tues) and Brazil IP (Weds) are amongst the highlights.
- Focus on Monday will be on BanRep’s interest rate decision, which looks like being a very close call, with a further pause the most likely outcome given recent political instability and fiscal uncertainties. On the data front, Chile releases month-end activity data for February, while Colombia’s unemployment rate is expected to have edged down to 10.5% last month. Elsewhere, the BCB publishes its weekly Focus survey.
- On Tuesday, Chile will release its monthly IMACEC activity index for February, while Peru March CPI inflation will cross. In Mexico, February remittance figures are due, while Banxico publishes its latest economist survey. Latest PMI data across the region will also be released.
- Brazil industrial production figures for February are the data highlight on Wednesday.
- On Thursday, attention will be on the minutes to the week’s BanRep monetary policy meeting, which are due for publication. On the data front, Mexico gross fixed investment and private consumption figures for January cross, followed by services PMI data in Brazil.
- The week ends with Brazil March trade data on Friday, as well as Mexico consumer confidence stats.
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STIR: Renewed Trump Tariff Threats Extend Day's Euribor Outperformance
Feb-26 17:54
- 3-month Euribor futures have lifted 2-2.5 ticks back towards session highs on Trump saying EU tariffs are to be 25% on autos and other things per Bloomberg headlines.
- It’s been met with a growth-negative reaction in rates despite it broadly being a repeat of previous threats of auto tariffs of “around 25%” which had earlier in the month been accompanied by threats of 25% or higher tariffs on pharmaceutical products (seen relative sensitivities in the bottom chart below).
- The below charts show clear outperformance for Euribor futures on the day vs US and UK counterparts, but continued prospects of heavy European defense spending and the broader results of the German election have seen sizeable underperformance for both Euribor and Sonia futures vs SOFR since levels shortly ahead of the European close on Friday.
OPTIONS: Recent Euribor Spread Buying Shifts To Selling Wednesday
Feb-26 17:52
Wednesday's Europe rates/bond options flow included:
- ERH5 97.625 calls ~4K given at 1.25
- ERM5 97.875/98.00/98.0625/98.1875 call condor 4K given at 4.
- ERM5 97.8125/97.6875ps 1x2, bought for 1.75 in 20k.
- ERM5 97.62/97.75cs sold at 9.75 in 6.25k.
- ERM5 97.875/98.00/98.125/98.25c condor vs 97.625/97.50ps, sold the Condor at 3.25 in 5.5k
US TSYS/SUPPLY: WI 7Y
Feb-26 17:51
WI 7Y has slipped to 4.201% from 4.217% heading into the US Tsy $44B 7Y Note auction (91282CMR9) cutoff at 1300ET, 25.6bp rich to last month's stop: 4.457% high yield vs. WI of 4.465%.
