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

• RES 3: 96.380 - High Mar 21 2023
• RES 2: 97.190 - High May 5 2023 
• RES 1: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg 
• PRICE: 96.160 @ 14:55 GMT Jan 03
• SUP 1: 96.000 - Low 19 Dec ‘24
• SUP 2: 95.750 - Low 27 Nov ‘23
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

Aussie 3-yr futures have started the year broadly flat, keeping the near-term trend neutral. Any further stabilisation and move higher would reinstate a bullish condition and signal scope for an extension. The key resistance here is at 96.730, the Sep 17 high. For bears, a stronger reversal lower would refocus attention on 95.760 where a break would instead highlight a stronger bearish set-up. 

ACGBs (YM -4.0 & XM -4.0) are cheaper after US tsys finished last week weaker following the December manufacturing ISM survey, which beat expectations. The headline reading of 49.3 improved from 48.4 prior and a 9-month high, besting the survey expectation of 48.4.

• This week, US economic data and Treasury supply are being brought forward to accommodate Thursday's "day of mourning" to honour President Carter.
• Cash ACGBs are 4-9bps cheaper, with the 5-year underperforming. The AU-US 10-year yield differential is at -18bps.
• Australia's S&P Global Dec. PMIs showed: Services PMI 50.8 vs 50.5 in Nov. and Composite Unchanged at 50.2.
• Swap rates are 3bps higher.
• The bills strip is showing -2 to -3 across contracts.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings. A 25bp rate cut is more than fully priced by April (118%), with a February cut at a 58% chance.
• The local calendar heats up this week with the release of November CPI data on Wednesday. The calendar also sees Building Approvals and Private Sector Finance tomorrow and Retail Sales and Trade Balance on Thursday.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.

USD/CNH traded with an upside bias on Friday, testing above 7.3600, although fell short of end 2024 highs of 7.3695. We track close to 7.3600 in early Monday dealings. CNH was close to unchanged for Friday's session. Spot USD/CNY broke above 7.3000, finishing up above 7.3200. This is fresh highs in onshore spot back to 2023. This move helped USD/CNH push higher. The CNY CFETS basket tracker tracked higher though, now above 102.00, fresh highs since 2022. 

• 2022 highs for USD/CNH, just under 7.3750, are within striking distance. The 20-day EMA is back near 7.3100 on the downside.
• The combination of further policy easing steps from China, with the PBoC reiterating late last week that RRR and interest rate cuts would be delivered at the appropriate time. along with US resilience continues to drive higher US-CH yield differentials. The 10yr spread is close to +300bps.
• Focus today will also be on the USD/CNY fixing, given Friday's spot break higher in USD/CNY. Some offset came from lower USD index levels though. Friday's fixing implied a 7.3316 cap for USD/CNY spot. The fixing has remained sub 7.2000 during this recent cycle move higher in USD/CNH.
• Local equities have started the year softly, the CSI 300 back sub 3800 at the end of last week. An expansion of the consumer trade in program didn't lift sentiment materially in this space.
• Locally today we have the Caixin services PMI for Dec. The market expects a 51.4 outcome (prior was 51.5). The official services PMI was better than forecast but detail suggested softer inflation outcomes (note the Dec prints on Thursday).