MEXICO: Feb CPI Data Expected To Keep Door Open To Further 50bp Rate Cut
Mar-06 17:58
- Analysts see February CPI inflation rising to 3.76% y/y tomorrow, from 3.59% in January, with the core rate edging lower to 3.62% y/y, from 3.66%. While food inflation may edge higher, core services inflation is likely to have moderated further amid weak domestic demand.
- JP Morgan expects the February CPI print to be broadly along the lines of the preliminary data, which showed headline inflation picking up to 3.7% y/y on base effects and core inflation broadly stable at 3.6% y/y. The relevant trends lie in the sequential moves within core prices, with both core goods and core services rising recently, but by less than expected. Services inflation overall has moderated, but remains uncomfortably high. JPM says that the expected drop in meat prices in H2 February could herald some coming relief.
- BBVA sees headline inflation increasing again, but with core remaining relatively flat and inflation overall staying low enough for Banxico to consider maintaining the 50bp easing pace in its next meeting, tariff news and MXN movements permitting.
- HSBC says that the CPI data for H2 February and the full month should reflect a relatively steady inflationary environment, with moderate price increases across the board. These should remain consistent with the central bank's latest framework, which keeps the door open to further 50bp cuts.
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POLITICAL RISK: US Federal Layoffs Likely If Not Enough Quitters - WaPo
Feb-04 17:55
- The Washington Post (in full here) writes that federal government layoffs are likely if too few choose to quit.
- “Workers have until Thursday to decide whether to take an offer to resign now and be paid through the end of September.”
- A reminder that public sector payrolls growth has been providing an outsized impact on total nonfarm payrolls growth for some time, although that has been coming from the much larger state and especially local government sectors. There are around 3.0m federal employees, 5.5m state and almost 15m local.
- As such, whilst overall government job creation averaged a monthly 32k in Q4 for close to double the 18k averaged in 2019 and treble the 9k averaged through 2017-18, federal-specific job creation has averaged 3k in Q4 for no discernible change from the 2k in 2019.
- Quit rates are much lower in the public sector than the private sector, at 0.8% as of today's report for Dec (and just 0.4% specifically for federal workers) compared to 2.2% for private, suggesting layoffs could be likely.
PIPELINE: Corporate Bond Issuance Update: Foundry JV Guidance Update
Feb-04 17:54
$14.8B corporate issuance has launched so far, to expand once Foundry JV 5pt launch
- Date $MM Issuer (Priced *, Launch #)
- 02/04 $3B *EIB WNG 10Y +60
- 02/04 $2.5B #NextEra Capital Energy $1.5B 30.5NC5.25 6.375%, $1B 30.5NC10.25 6.5%
- 02/04 $2B *L-Bank $1B 2Y SOF+30, $1B 5Y SOFR+47
- 02/04 $1.5B #BNG Bank 3Y SOFR+37
- 02/04 $1.25B #BNY Mellon 6NC5 +62
- 02/04 $1.1B #National Rural Utilities $600M 3Y +52, $500M 5Y +67
- 02/04 $1B #Altria $500M 3Y +67, $500M 10Y +117
- 02/04 $1B #National Fuel Gas $00M 5Y +118, $500M 10Y +147
- 02/04 $800M #GATX $500M 10Y +102, $300M 2054 Tap +113
- 02/04 $650M #Valero Energy 5Y +87
- 02/04 $Benchmark Foundry JV 6Y +120, 8Y +150, 11Y +160, 12Y +170, 14Y +180
- Expected to issue Wednesday:
- 02/05 $1B KFW 4% 2026 TAP SOFR+20
- 02/05 $Benchmark IDA 10Y SOFR+63a
OPTIONS: More Limited Rates Trade After Prior Week's Flurry
Feb-04 17:52
Tuesday's Europe rates/bond options flow included:
- OEH5 118.25c, sold at 15.5 down to 14.5 in 14k
- ERM5 97.50 put, paper pays 1.25 on 16k
- SFIK5 95.75/95.90/96.05/96.20 call condor bought for 7-7.25 in 10k
- SFIM5 95.85/95.65ps 1x2 with SFIU5 96.00/95.70ps 1x2, bought the strip for 5.25 in 2.5k.
