EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (04 Apr)

Option desks reported better SOFR & Treasury call volume on net Wednesday, with some chunky put structure selling and consistent vol selling on the day. Underlying futures weaker, near late lows as risk-off tone consolidates slightly on US auto tariff on Canada & Mexico delayed, trade talks ongoing. Projected rate cuts through mid-2025 recede from morning levels (*) as follows: Mar'25 at -2.2bp, May'25 at -10.6bp (-12.2bp), Jun'25 at -27bp (-29.2bp), Jul'25 at -36.2bp (-39.8bp).

• SOFR Options:
  • +2,000 2QM5 96.37 straddles 49.5 ref 96.40
  • -3,000 3QZ5 96.50/96.75 call strip, 46.5 vs. 96.28/0.68%
  • -5,000 0QK5 96.62/96.93 call spds 8.0 ref 96.50
  • Block/pit, -30,000 SFRM5 95.50/96.00/96.50 put flys, 26.0 vs. 96.005/0.10%
  • -10,000 0QH5 96.06/96.31 1x2 call spds, 1.0 to 0.5 ref 96.62
  • -2,000 SFRM5 95.93 straddles 27.0 ref 96.005/0.14%
  • Block/screen +8,000 SFRZ5 95.50 puts, 3.5
  • -2,000 SFRZ5 96.37 straddles 68.5 ref 96.41
  • -2,000 SFRM5 96.00 straddles 29.0 ref 96.00
  • +10,000 0QM5/0QU5 97.50 call spds 5.25
  • +10,000 0QM5 97.00/97.50 call spds, 6.5 ref 9651
  • Block, 3,000 0QM5 95.81.96.06.96.31 put flys, 4.0 vs 96.425
  • Block, 8,000 0QK5/0QQ5 95.62 put strips, 2.0
  • 2,000 SFRZ5 95.43/95.62/95.81 put flys ref 96.375
  • 3,000 0QH5 96.75/97.00 call spds ref 96.42
  • 4,000 2QM5 96.50/97.00 call spds ref 96.39
  • 2,500 SFRZ5 96.12/96.37 call spds ref 96.355
  • 1,750 0QK5 96.50/97.00/97.25 broken call flys ref 96.47
• Treasury Options:
  • -5,000 TYJ5 110.75/111.25 strangles, 106
  • Block, 12,500 TYK5 113.5 calls, 19 vs. 111-02.5/0.22% total volume over 105,000
  • 85,000 TYK5 113.5 calls blocked at 21 vs. 111-03.5/0.22% at 0750:00ET followed by just over 97,000 TYK5
  • 13.5 calls on the screen ref 111-02 to -03 as market makers likely unwind the initial cross.
  • 2,000 FVM5 109/110 call spds ref 107-28.75
  • 5,000 USK5 112/125 strangles ref 117-29
  • over 5,500 USJ5 119 calls, 50 last
  • over 5,100 USJ5 120 calls, 31 last
  • 2,000 USJ5 114.5/115.5 put spds ref 117-23
  • appr +20,000 TYJ5 109.75/112.5 combos on 1:1 ratio, +c 0.0-1 in pieces followed Block
  • Block, -10,000 TYJ5 109.75/112.5 3x2 combo, 11 net/put sold over vs. 110-31.5/0.57%

• RES 4: 162.70 High Jan 28       
• RES 3: 161.80 High Jan 30       
• RES 2: 161.19 High Feb 13 and a bull trigger   
• RES 1: 160.53 High Mar 5
• PRICE: 160.12 @ 15:01 GMT Mar 5 
• SUP 1: 157.98 20-day EMA 
• SUP 2: 155.60 Low Mar 4 
• SUP 3: 154.80 Low Feb 28 and a bear trigger 
• SUP 4: 154.42 Low Aug 5 ‘24 and key medium-term support

This week’s strong rally in EURJPY undermines a recent bearish threat and instead highlights a possible reversal. The cross has again traded higher, today, and pierced resistance at the 50-day EMA, at 159.52. A clear break of the EMA would strengthen a bull theme and expose the key resistance at 161.19, the Feb 13 high. Initial support to watch is 157.98, the 20-day EMA. Key support has been defined at 154.80, the Feb 28 low.    

• Copper has rallied by an impressive 5.5% today, driven by President Trump’s threat to impose a 25% tariff on copper imports in his speech to Congress yesterday.
• The move is the largest one-day dollar and percentage gain in copper since November 2022, bringing the red metal up to $481/lb, the highest level since Feb 14.
• Copper futures remain in a bull cycle, with next resistance seen at $488.50, the Feb 14 high, followed by $500 round number resistance.
• Meanwhile, spot gold remains broadly unchanged at $2,920/oz, less than $40 below last week’s record high, amid hope of a tariff deal between the US, Mexico and Canada.
• Reuters has reported that the US will give a one-month exemption on any autos coming through USMCA.
• Gold remains 2% higher on the week, and a stronger rally would refocus attention on the next objective at $2,962.2, a Fibonacci projection. This would also open the $3,000.0 handle.
• In contrast, WTI has fallen further today amid oversupply concerns from OPEC’s returning barrels, rising US crude stocks, and fears of weaker global demand due to increased trade protectionism.
• WTI Apr 25 is down by 3.0% at $66.2/bbl.
• US crude inventories rose by 3.6m bbl, driven by a decline in refinery runs and despite a small drop in imports, while exports held above 4mb/d.
• Recent weakness in WTI futures has confirmed a resumption of the downtrend that started Jan 15, paving the way for an extension towards $65.68 next, the Oct 29 ‘24 low.