CHILE: Deutsche Bank Says Inflation Expectations Concerns Support CLP Longs
Feb-13 19:21
- Deutsche Bank says that conditions remain supportive of the Chilean peso, as the uptick in domestic inflation expectations raises the bar for the BCCh to continue lowering rates. They see this as continuing to support their constructive CLP view, which has been aided by a recent change in positioning indicators, with short CLP bets being unwound recently, coupled with consistent USD selling flows by the Finance Ministry.
- DB notes that inflation expectations are increasingly gaining relevance in BCCh policy deliberations. They featured prominently in the last meeting’s statement and minutes, and board members have explicitly referred to them in recent presentations to the public.
- DB believes the BCCh waited until expectations from their own surveys became unanchored before demonstrating greater concern and incorporating this into their more hawkish stance.
- Market pricing has taken notice of this, with 1-year rate pricing increasing, along with the increase in breakevens. If in late 2024 the market was pricing cuts for 2025, that's no longer the case.
- Re-anchoring inflation expectations becomes a relevant factor to limit CLP depreciation, and the latest BCCh hawkish shift seems to suggest they are onboard with this.
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US STOCKS: Late Equities Roundup: Second Half Recovery, Banks Up Ahead Earnings
Jan-14 19:08
- Stocks have recovered from midday lows and are making moderate gains in late trade - still off this morning's post-data knee-jerk highs as accounts square risk and migrate to the sidelines ahead of Wednesday's key CPI inflation data.
- Currently, the DJIA trades up 206.18 points (0.49%) at 42504.32, S&P E-Minis up 20 points (0.34%) at 5894, Nasdaq up 46.2 points (0.2%) at 19133.11.
- Utilities continue to outperform while Financial sector shares have gained momentum in the second half. Independent power and electricity providers rebounded after Monday's selling: Vistra +4.91%, Constellation Energy +3.09%, NRG Energy +2.42%.
- Banks and financial services shares led gainers in the second half - taking some risk with banks kicking off the latest earnings cycle tomorrow: Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, followed by M&T Bank, US Bancorp, Morgan Stanley and PNC on Thursday.
- Leading gainers included Citizens Financial +3.74%, Huntington Bancshares +2.81, Fifth Third +2.8% and Discover Financial Services +2.64%.
- On the flipside, Health Care and Communication Services continued to underperform in late trade. Pharmaceuticals weighed on the Health Care sector: Eli Lilly -6.5% after phase 1 trials of it's weight loss drug were terminated, Charles River Labs -5.35%, Biogen -3.64% and Moderna -2.87%.
- Interactive media and entertainment shares weighed on the Communication Services sector: Meta -1.83% amid reports of staff reductions of lowest 5% performers, Netflix -0.62%, Alphabet -0.32%.
US TSY OPTIONS: UPDATE: Large Mar'25 10Y Call Buy Update
Jan-14 18:49
- over +128,600 TYH5 108.5 calls on the day from 27 to 29 vs. futures from 107-08.5 to -11 on an appr 0.30% delta
US: FED Reverse Repo Operation
Jan-14 18:21
RRP usage retreats to $160.219B this afternoon from $183.669B on Monday. Compares to $98.356B on Friday, December 20 - the lowest level since mid-April 2021. The number of counterparties rises to 59 from 51.
