EM LATAM CREDIT: "RAIZEN: NO DECISION YET ON POTENTIAL CAPITAL INCREASE" - BBG

ACGBs (YM -3.0 & XM -3.0) are trading cheaper, partially unwinding yesterday’s post-CPI rally. This comes after a NY session where US tsys remained range-bound with little directional movement. 

• US markets remain sensitive to headline risk, with stocks and rates selling off after early headlines reported Trump is considering declaring a state of emergency to enact universal tariffs (opposite reaction from Monday's early rally on WAPO article that suggested a watered down tariff plan).
• US tsys rallied after dovish comments from the Fed's Waller, a weaker-than-expected ADP report, and a solid 30-year auction.
• Risk sentiment then cooled slightly after the December FOMC minutes underscored a shift toward a slower pace in cutting rates citing rising upside risks to inflation and elevated uncertainty over potential changes in trade and immigration policy.
• Cash ACGBs are 2-3bps with the AU-US 10-year yield differential at -16bps.
• Swap rates are 2bps higher.
• The bills strip is -1 to -2 across contracts.
• RBA-dated OIS pricing is flat to 2bps firmer. A 25bp rate cut is more than fully priced by April (112%), with a February cut at a 64% chance.
• Today, the local calendar shows retail sales and trade balances.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.

Oil prices were lower on Wednesday following prices rising further during early European trading and reaching important technical levels which triggered selling. Also EIA data showing a smaller-than-expected crude drawdown while product inventories continued to rise weighed on crude. The stronger greenback (USD BBDXY +0.4%) also pressured dollar-denominated oil.

• WTI rose to a high of $75.29/bbl and then sold off to a low of $73.16. It is down 1.3% to $73.32/bbl but still 2.2% higher this month. The trend structure remains bullish with key short-term resistance at $76.41. Initial support is at $72.70, January 3 low.
• Brent peaked at $77.89/bbl and then fell to a low of $76.04/bbl. It finished 1.1% lower at $76.20 but still up 2.1% in January to date. Initial support is at $75.53, January 3 low. Key resistance is at $79.50.
• The EIA reported US inventories fell 959k barrels last week, the seventh consecutive weekly decline, but product stocks continued to rise with gasoline up 6.33mn and distillate 6.07mn. Refinery utilisation rose 0.6pp to 93.3%. There may be drawdowns in coming weeks due to increased demand for heating oil and some crude production facilities frozen. Heating oil stocks fell 632k barrels last week.
• JP Morgan expects global oil demand in January to be 1.4mbd higher than last year. Generally an excess supply of oil is expected in 2025, but there are signs of less demand for sanction-affected Iranian and Russian crude. 

USD/CNH reached intra-session highs on Wednesday of 7.3615 post the Asia close, but drifted slightly lower from there. We track near 7.3530/35 in early Thursday dealings, after losing nearly 0.20% for Wednesday's session. Spot USD/CNY closed above 7.3300 and remained close to the upper daily trading band limit. For the CNY CFETS basket tracker we edged down a little further to 101.33 (per BBG), the third straight loss for the index. 

• Recent ranges continue to hold for USD/CNH. The 20-day EMA support level continues to track higher, last near 7.3170, while recent highs rest at 7.3695.
• Focus remains on spot USD/CNY being close to the upper daily trading limit. With the fixing remaining just under 7.1900, this will continue to curb upside in spot. BBG noted state banks were selling USD/CNY around the 7.3320 level yesterday.
• The bias around today's fixing consensus from the market is likely to be higher, given the 4:30pm onshore close rose and we had further broad USD gains. Wides on the fixing error haven't got beyond -1600pips in recent years (yesterday's outcome was -1528 pips).
• Broader USD sentiment was supported by reports incoming US President Trump is considering a national economic emergency declaration to allow for a new tariff program (per CNN). The Fed Mins lent hawkish, but Fed Governor Waller continued to press for rate cuts.
• Locally today we have the Dec inflation outcomes. Headline CPI is projected at 0.1% y/y (prior 0.2%), while PPI is forecast at -2.4%y/y, versus -2.5% prior. Due between Jan 9 to Jan 15 is the Dec new loans/aggregate credit figures.