MEXICO: Valmex Say Banxico Has Made Clear It Will Increase Easing Pace

Jan-29 17:20

The chief economist at brokerage Valores Mexicanos has stated that Banxico has laid the foundations to increase the monetary policy easing pace next week. Valmex expect two 50bp cuts and two more 25 bps cuts this year, taking Banxico’s benchmark rate to 8% by the end of 2025, according to a Bloomberg article.
Banxico’s 2025 monetary policy plan, issued last Friday, changed the panorama for possible rate cuts this year. Valmex point out there is a risk that Banxico should be more prudent, or it may have to raise rates again in a short period of time, as Brazil did.
They believe that if US President Donald Trump imposes across-the-board 25% tariffs on Mexico, peso would sink to around 23 pesos per dollar for a couple weeks before gradually recovering. The base case remains for a more moderate or gradual tariff plan, where tariffs are used as a political tool, with peso trading around 20.80 at the end of 2025.

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Dec-30 17:08

European curves leaned modestly bull flatter Monday.

Bunds and Gilts gained fairly steadily throughout the session, regaining ground from Friday's sell-off.
There was no clear upside driver in the morning session, though gains ramped up in the afternoon as equities fell and the USD gained in an apparent risk-off move, while US MNI Chicago PMI came in below-expected.
Spanish flash December inflation came in above-expected (core 2.6% Y/Y vs 2.4% survey), but there was little market reaction with the main national readings not released until next week.
ECB's Stournaras eyed gradual rate cuts but that bigger reductions "shouldn't be ruled out" if inflation cooperates.
Periphery EGB spreads widened by a little under 1bp as equities fell. French OATs underperformed peers, with 10Y spreads widening 2bp.
As per usual on New Year's Eve, Tuesday's schedule is light, with Irish flash inflation the main scheduled highlight, and widespread market closures in Europe until Thursday.

Closing Yields / 10-Yr EGB Spreads To Germany

Germany: The 2-Yr yield is down 1.8bps at 2.082%, 5-Yr is down 3.6bps at 2.154%, 10-Yr is down 2.9bps at 2.367%, and 30-Yr is down 3bps at 2.597%.
UK: The 2-Yr yield is down 1.2bps at 4.453%, 5-Yr is down 1.3bps at 4.394%, 10-Yr is down 2.2bps at 4.611%, and 30-Yr is down 0.9bps at 5.173%.
Italian BTP spread up 0.8bps at 115.5bps / French OAT up 2.1bps at 83.3bps

Dec-30 17:01

Stocks remain weaker but are trading off early session lows ahead midday Monday, paring losses after better than expected pending home sales (2.2% vs. 0.8% est) and Dallas Fed Mfg (3.4 vs. -3.0 est) data.
Major averages continue to see-saw inside trading ranges over the past ten days amid alternating position squaring flow heading into year end. Currently, the DJIA trades down 377.12 points (-0.88%) at 42616.8, S&P E-Minis down 61.5 points (-1.02%) at 5965.75, Nasdaq down 202.1 points (-1%) at 19519.81.
Consumer Discretionary and Materials sectors leg laggers in the first half, auto-related shares weighing on the former: Tractor Supply -2.45%, Tesla -2.27%, LKQ Inc -2.17% and BorgWarner -1.93%. Metals and mining shares weighed on the Materials sector: Albemarle -2.80%, Newmont Corp -2.33%, Freeport-McMoRan -2.15%.
On the positive side, Energy and Utility sectors outperformed, oil $ gas stocks buoyed the Energy sector as cride prices inched higher (WTI +0.58 at 71.18): EQT Corp +5.10%, Coterra Energy +3.73%, Devon Energy +2.18%. Meanwhile, independent power providers supported the Utility sector: Constellation Energy +0.14%.

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