EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (28 Mar)

• Treasuries bounced off early session lows and look to finish near session highs, curves flatter with bonds outperforming as trade policy concerns rekindled risk-off sentiment prevalent in the first half of the week.
• Risk-off as Pres Trump cabinet meeting marks April 2 when Canada & Mexico "tariffs will go on, not all but a lot of them" , taking a firmer stance on the EU, stating that the decision on tariffs on the EU is 25% and that details will be “coming soon”.
• Tsy Jun'25 10Y futures trade at 110-28 (+10.5) after the bell, piercing resistance at 110-20, the 76.4% retracement of the Dec 3 - Jan 13 bear leg. This broadens the bullish recovery and signals scope for a climb towards the 111-00 handle, ahead of 111-22+, the Dec 3 high and a key resistance.
• New home sales fell much more sharply in January than expected, but this was more than made up for by upward revisions while building permits were revised slightly lower in January’s final reading, to 1,473k - representing a 0.6% decline rather than the initially reported 0.1% rise.
• Canadian dollar and Mexican peso have rallied as a result. USDCAD fell from 1.4360 to 1.4300, while USDMXN fell from 20.47 to 20.29 lows. EU tariff mention saw EURUSD slipping from key resistance around 1.0530 to 1.0485 in short order.
• The upcoming US economic data with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3. However, January’s monthly report (on Friday) is likely to show consumption got off to a much weaker start of 2025.

• RES 4: 0.6471 High Dec 9 ‘24 
• RES 3: 0.6429 High Dec 12 ‘24               
• RES 2: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg 
• RES 1: 0.6409 High Feb 21
• PRICE: 0.6320 @ 16:22 GMT Feb 26
• SUP 1: 0.6300/6231 Low Feb 26 / Low Feb 10 
• SUP 3: 0.6171/6088 Low Feb 4 / 3
• SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
• SUP 4: 0.6000 Round number support

AUDUSD traded lower Wednesday. The latest pullback appears corrective, however, the pair has traded through support at the 50-day EMA, at 0.6316. A clear breach of this average would signal scope for a deeper retracement and expose 0.6231, the Feb 10 low. For bulls, a resumption of gains would refocus attention on key resistance at 0.6402/14 - the 100-dma and 38.2% of the Sep 30 ‘24 - Feb 3 bear leg respectively.  

Better call buying resumed after SOFR & Treasury options appeared mixed on lighter volumes Wednesday morning. Underlying futures bounced off early session lows as Pres Trump's cabinet meeting rekindled market concerns over global trade policy. Projected rate cuts through mid-2025 have firmed up from morning levels (*) as follows: Mar'25 at -0.7bp (-0.5bp), May'25 at -6.9bp (-6.4bp), Jun'25 at -21.5bp (-19.6bp), Jul'25 at -29.6bp (-27.6bp).

• SOFR Options:
  • +8,000 0QN5/2QN5 96.50/97.00 call spd strip, 24.75-25.0
  • +7,000 SFRM5 95.62 puts, 1.0
  • Block, +15,000 2QM5 96.75/97.00 call spds vs. 95.50/95.75 put spds, 1.0 net calls over
  • Block, 10,000 2QM5 96.50/96.75 call spds vs. 95.50/95.75 put spds, 4.0 net calls over
  • +5,000 SFRU5 98.00/99.00 2x3 call spds 2.0 ref 96.045
  • +5,000 SFRM5 95.62 puts 1.0 ref 95.865
  • +5,000 SFRJ5 95.75/96.00 1x2 call spds, 3.5 ref 95.87
  • +3,000 0QH5 96.18/96.31 strangle, 13.5
  • -5,000 SFRZ5 95.68/95.93 put spds 9.5 ref 96.18
  • +50,000 SFRM5 96.18/96.62 call spds .62 on legs
  • 16,000 0QK5 96.62/96.93 call spds ref 96.295
  • 5,000 SFRZ5 95.50/95.87 put spds ref 96.175
  • 2,500 SFRZ5 96.12/96.37/96.62 put flys
  • 6,500 0QH5 95.93/96.06/96.18 put flys ref 96.25 to -.235
  • 4,000 2QJ5 96.25/96.50/96.62 broken call flys ref 96.27
• Treasury Options:
  • Block, total 105,000 TYK5 113.5 calls, 19 vs. 110-20/0.17%
  • +15,000 TYK5 112 calls, 33 ref
  • -6,750 USJ 119/122 call spds, 33
  • over -7,000 USJ5 119/122 call spds, 33 ref 117-09
  • -10,000 wk4 TY 111 calls, 6
  • 4,500 TYK5 114.5 calls, 10 ref 110-18
  • +30,000 TYJ5 109/109.5 put spds, 9 ref 110-11.5
  • over 5,500 TYJ5 110.5 calls, 42 last ref 110-12
  • over 12,200 TYK5 110.5 calls ref 110-123,100 TYK5 106/108 put spds vs. TYM5 105/107 put spd spds
  • 2,000 FVK5 106.75/107.5/108 broken call flys ref 107-12.75