EM LATAM CREDIT: Brazil's Vale (VALEBZ; Baa2pos /BBB- /BBB) 1Q Earnings Miss

USD/JPY breaks through the morning highs on the latest leg lower for JPY, pushing the pair within range of Y150.94, the recovery high and next real resistance. 150.96 also marks the 50-day EMA, a break above which would be the latest counter-trend signal and could signal scope for a stronger rally.

• The cross-asset price action with equities is another reminder that the intraday stocks x USD/JPY correlation remains inconsistent. We noted earlier today the importance of the 50-dma in AUD/JPY, a level that's again being tested having contained rallies on several occasions over the past two months - that's also under pressure here Y95.37 and a break above would mark a further signal that the bear phase off the year's high may have concluded.

GBP STIRs followed swings in the long end over the Spring Statement, before stabilising close to pre-event levels.

• BoE-dated OIS show 45bp of cuts through year-end vs. 40bp at yesterday’s close and ~48bp at one point today.
• 18bp of cuts showing for May, 21bp through June and 31.5bp through Aug.
• We continue to look for the next cut in May, matching the wider sell-side consensus.
• Nothing seen at today’s fiscal event changes that view.
• Markets have been unwilling to price less than 40bp of cuts in recent days, given the BoE’s continued preference for gradual cuts.
• SONIA futures are flat to +7.0, after registering session lows around the budget.
• Those of a dovish disposition may look to sell SFIM5/Z5 given the spread’s proximity to multi-week closing highs and the relatively shallow degree of cuts priced into that spread at present, particularly with the direction of travel for Bank Rate clear, albeit with the speed of further cuts in question. 

Fig. 1: SONIA Jun ‘25/Dec ’25 Spread (SFIM5/Z5)

Source: MNI - Market News/Bloomberg

• US TSY 1Y-10M FRN AUCTION: NON-COMP BIDS $15 MLN FROM $28.000 BLN TOTAL