EM LATAM CREDIT: Fitch Ratings Affirmation: Republic of Chile (CHILE; A2/A/A-)

Heavy SOFR & Treasury options reported Monday, call volume gaining in the second half as underlying futures drifted off midday lows. Focus on this week's PPI and CPI inflation measures (Wed & Thu respectively). Projected rate cuts through mid-2025 continue to retreat, current vs. late Friday levels* as follows: Jan'25 steady at -0.7bp, Mar'25 -4.9bp (-6.3bp), May'25 -8.4bp (-10.5bp), Jun'25 -16.3bp (-18.2bp), Jul'25 -18.7bp (20.2bp).

• SOFR Options:
  • +10,000 SFRH5 95.68/95.75/95.81/95.87 call condors, .75 vs. 95.74/0.12%
  • Block, 10,000 0QH5 96.00/96.12/96.25 call trees, 3.5 net (2-legs over)
  • -8,000 SFRM5 95.62/95.75 put spds, 6.25 ref 95.815
  • -5,000 SFRU5 95.87/96.06 call spds vs 95.25 put, 0-.25 ref 95.86
  • 25,000 0QH5 96.06/96.31 1x2 call spds, .25 ref 95.85
  • +5,000 SFRN5 96.00/96.37 call spds, 8.5 vs. 95.865/0.18%
  • +5,000 0QM5 96.25/96.37 call spds 1.0 over SFRM5 96.06/96.18 call spd
  • +10,000 0QH5 96.00/96.25/96.81 1x1x2 call trees, +3.25 net ref 95.865
  • +5,000 SFRZ5 95.50/96.00/96.50 call flys, 10.75 ref 95.885
  • 5,000 SFRJ5 95.50/95.56 put spds ref 95.83
  • +10,000 SFRM5 95.56/96.12 strangle, 12.00 ref 95.83
  • -10,000 SFRU5 95.37/95.56 put spds vs 5,000 SFRM5 95.62/95.87 put spds, 5.75-6
  • -15,000 SFRU5 95.18/95.43 put spds v SFRZ5 95.87/96.06 put spds, 7.5-7.25
  • -4,000 SFRZ5 95.18 puts 0.5 over 96.12/96.62 call spds vs 95.88/0.38%
  • +4,000 SFRZ5 95.25 puts, 13.5 vs. 95.88/0.25%
  • 8,800 0QN5 96.62/96.68 call spds ref 95.835
  • 3,750 SFRG5 95.68/95.75 put spds ref 95.735
  • 5,000 SFRG5/SFRH5 95.87/96.06 call spd spds
  • 3,500 2QJ5 96.25/96.87 call spds ref 95.74
  • over 26,000 SFRU5 95.87/96.06 call spds vs. 95.25 puts ref 95.835
  • 2,000 SFRU5 96.50/97.00 call spds ref 95.835
  • +10,000 SFRU5 95.50/95.62 put spds, 3.5 ref 95.835 to -.85
  • 1,500 0QJ5/3QJ5 95.25 put spds
  • Block, 4,100 SFRU5 96.12 puts, 45.5 ref 95.85
  • Block, 3,156 0QU5 96.12 puts, 58.0 ref 95.80
  • 5,200 0QG5 95.87/96.12/96.25 broken put trees ref 95.845
  • 3,000 SFRM5 95.75 puts ref 95.82
  • 2,000 SFRM5 96.12/96.37 call spds ref 95.825
• Treasury Options:
  • +60,000 TYG5 116.75 calls, cab 7
  • 4,500 TYG5 107.5/TYH5 105 put spds, 17
  • 5,000 TYG5 106.5/TYH5 107.5 put spds, 51 net/March over
  • 2,500 FVH5 105.5/105.75/106/106.25 call condors
  • over 6,300 TYG5 108.5 calls, 6 last
  • 2,000 TYH5 106 puts, 28 last
  • 3,000 TYH5 106/107 put spds ref 107-08.5
  • 1,500 TYG5 107.5/109 put spds, 114 ref 107-08.5
  • over 4,700 FVH5 104.5 puts, 17 last
  • 4,600 FVG5 105.5 puts, 24.5 last
  • 4,400 FVH5 105 puts, 28 ref 105-11
  • 3,500 FVZH5 101.75 puts ref 105-14

• RES 4: 0.8494 High Aug 26 ‘24 
• RES 3: 0.8471 61.8% retracement of the Aug 8 - Dec 19 downleg  
• RES 2: 0.8448 High Oct 31 and reversal trigger
• RES 1: 0.8424 50.0% retracement of the Aug 8 - Dec 19 downleg
• PRICE: 0.8390 @ 20:01 GMT Jan 13
• SUP 1: 0.8318/8284 50-day EMA / Low Jan 8 
• SUP 2: 0.8263 Low Dec 31
• SUP 3: 0.8223 Low Dec 19 
• SUP 4: 0.8203 Low Mar 7 2022 and a major support

EURGBP traded sharply higher last week and remains firm. The cross has breached resistance at the 50-day EMA, and cleared the December highs. This undermines the recent bearish theme and suggests scope for a stronger short-term recovery. Note too that 0.8376, the Nov 19 high and a key resistance, has also been cleared. Sights are on 0.8424, a Fibonacci retracement and the Jan 13 high. Support at the 50-day EMA is at 0.8318.

• Stocks are still trading mixed but climbing off lows amid chatter of an impending Israeli ceasefire/hostage deal tomorrow that lent to late Monday risk-on tone. Narrow ranges persisted as focus remains on this week's PPI and CPI inflation measures on Tuesday and Wednesday respectively, as well corporate earnings that kick off this week.
• Currently, the DJIA trades up 267.83 points (0.64%) at 42205.15, S&P E-Minis down 3.25 points (-0.06%) at 5862.5, Nasdaq down 137.1 points (-0.7%) at 19022.49.
• Energy and Materials sectors continued to outperform in the second half, support for the former tied to gains in crude (WTI +2.40 at 78.97): Valero Energy +5.29%, Marathon Petroleum +3.56%, APA Corp +3.25%. Materials led by Mosaic +7.49%, CF Industries +7.37%, Steel Dynamics +6.22% while Albemarle gained 4.99%.
• Utility and Information Technology sectors continued to underperform, electricity providers weighed on the former: Edison International down nearly 12% amid investigations into whether electrical equipment operated by SoCal Edison sparked a blaze in Hurst. Elsewhere, Constellation Energy declined 6.15% despite several agency upgrades, PG&E -4.19% and AES Corp -3.33%.
• IT sector shares remained under pressure as the Biden administration looked to curb semiconductor exports to China: Super Micro Computer -4.79%, Micron -4.17%, Palantir -4.25, Nvidia -2.53%.
• Reminder, the next round of quarterly earnings kicks off this week with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 15-16.