EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (13 Feb)
Source: BBG
Measure Level Δ DoD
5yr UST 4.4% -8bp
10yr UST 4.5% -9bp
5s-10s UST 13.8 -1bp
WTI Crude 71.4 +0.1
Gold 2928 +24.3
Bonds (CBBT) Z-Sprd Δ DoD
ARGENT 3 1/2 07/09/41 816bp -1bp
BRAZIL 6 1/8 03/15/34 253bp -3bp
BRAZIL 7 1/8 05/13/54 341bp -2bp
COLOM 8 11/14/35 364bp -2bp
COLOM 8 3/8 11/07/54 444bp -0bp
ELSALV 7.65 06/15/35 388bp +13bp
MEX 6 7/8 05/13/37 252bp -5bp
MEX 7 3/8 05/13/55 309bp -5bp
CHILE 5.65 01/13/37 144bp -0bp
PANAMA 6.4 02/14/35 323bp -4bp
CSNABZ 5 7/8 04/08/32 544bp +6bp
MRFGBZ 3.95 01/29/31 275bp +1bp
PEMEX 7.69 01/23/50 631bp -2bp
CDEL 6.33 01/13/35 192bp +1bp
SUZANO 3 1/8 01/15/32 178bp -2bp
FX Level Δ DoD
USDBRL 5.77 +0.01
USDCLP 945.87 -6.48
USDMXN 20.4 -0.09
USDCOP 4139.80 -27.80
USDPEN 3.72 +0.00
CDS Level Δ DoD
Mexico 118 (2)
Brazil 168 (2)
Colombia 183 (4)
Chile 53 (1)
CDX EM 97.78 0.09
CDX EM IG 101.19 0.07
CDX EM HY 94.08 0.14
Main stories recap:
The EM Asia primary market reawakened with deals from Hubei and Taiwan Cement while secondary bond spreads widened. CEEMEA saw a mandate from Emirates and secondary market spreads broadly flat, though once again Ukraine bonds rallied while Israel bonds widened. Latam was focused on secondary trading with benchmark bonds up in price but generally lagging the 5-10 bps rally in Treasury yields. Some components of the PPI inflation data were reported better than expected leading some economists to lower their estimate for core PCE, regarded as the Federal Reserve’s preferred inflation gauge. MEX outperformed today while we saw profit taking in ELSALV and Ecuador bonds break to new lows for this year as people contemplated a victory for Correa protégé Luisa Rodriguez in the April 13 Presidential election runoff.
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Historical bullets
JGB TECHS: (H5) Bears Remains In The Driver’s Seat
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 140.66 @ 20:38 GMT Jan 14
- SUP 1: 140-00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively.
EURJPY TECHS: Monitoring Support
- RES 4: 165.43 High Nov 8
- RES 3: 164.90 THigh Dec 30 and a key short-term resistance
- RES 2: 164.55 High Jan 7
- RES 1: 163.19 High Jan 10
- PRICE: 162.77 @ 20:54 GMT Jan 14
- SUP 1: 160.04 Low Jan 13
- SUP 2: 160.54 50.0% retracement of the Dec 3 - 30 bull cycle
- SUP 3: 159.51 61.8% retracement of the Dec 3 - 30 bull cycle
- SUP 4: 158.67 Low Dec 11
The recent move down in EURJPY appears corrective. The recovery from Monday’s low highlights a potential short-term reversal and the end of the corrective cycle. A continuation higher would open 164.90, the Dec 30 high. Clearance of 164.90 would confirm a resumption of the uptrend. On the downside, key short-term support has been defined at 160.04, the Jan 13 low. A breach of this level would be bearish.
US TSYS: Tsys Bid But Well Off PPI Highs in Lead-Up to CPI Wednesday
- Treasuries are holding mildly higher levels after the bell, well off this morning's post-PPI data highs as as markets delved into the PPI details where most PCE components were on the soft side with the notable exception of airfares, which typically jump in December.
- The Mar'25 10Y contract trades +3 at 107-10.5 after the bell compared to 107-18.5 post data high - well below initial technical resistance at 108-21.5/109-06 (20-day EMA / High Dec 31). Curves bull steepened on the day: 2s10s +2.715 at 42.358, 5s30s +2.558 at 38.859.
- Focus turns to tomorrow's headline CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Core goods inflation will be closely looked at amidst heavy focus on potential tariffs under the second Trump administration but also with a further near-term dampening factor from continued US dollar appreciation.
- Analysts look for core goods inflation between 0.2-0.3% M/M after it accelerated to 0.31% M/M in Nov for a 19-month high. That was the third consecutive monthly increase in core goods prices after sequential deflation in 14 of the previous 15 months.
- Scheduled Fed speakers for Wednesday include Richmond Fed Barkin at 0920ET (text, Q&A), MN Fed Kashkari fireside chat at 1000ET (no text, Q&A), NY Fed Williams keynote address CBIA eco-summit at 1100ET (text, Q&A) and Chicago Fed Goolsbee Midwest economics forum at 1200ET (no text, Q&A). Fed Beige Book is released at 1400ET.
