DJIA -1.3% / S&P -1.4% / CCMP -1.8% / CRUDE +1.2% $77.87 / GOLD -1.993 $1,993 / VIX +14% 15.85: US CPI tops estimates. DJIA biggest intra-day decline in 11 months. HK to reopen after CNY holidays. Indonesia election due today with former Defence Minister tipped to win.
UST yields surged to the highest levels since before the Dec FOMC, 2yr yields at 4.65, 5yr at 4.30%; 10yr at 4.30% and 30yr at 4.45%. 5yrs continued to struggle on the curve as 5s30s traded through +15bps for the first time in almost a month. Inflation related “TIPs” outperformed with 2yr BEI’s (break-even inflation) up 13bps at 257bps, the highest since April 2023.
Banks held off on changing Fed calls with plenty of data to digest before upcoming meetings; GS, who got the call on this inflation figure, is looking for the first cut in May, BoA continues to target June, as does JPM. Data supports the Fed messaging of higher-for-longer.
What’s Priced in? Only one 25bp cut through the Mar/May/Jun meetings, down from 60bps pre-Jan Non-Farm Payrolls. Under 90bps of cuts are priced in through the end of the year.
Mexico's government has granted Pemex a four-month tax exemption, enhancing the state-owned oil company's liquidity after it received a double downgrade by Moody’s. This move by AMLO, aimed at revitalising Pemex, comes amidst warnings of potential pressure to Mexico´s sovereign ratings. Pemex EUR issues were well offered on Monday, down -1.5pts. Yesterday saw a small retracement. Mexico’s MBONOS 10yr have a yield to maturity of around 9.25% currently with a spread to US Treasuries of 495bps, the lowest since August last year. Banco de Mexico is issuing MBONO strips and inflation linked UDIBONO today.
Today is a holiday in China and Taiwan. Indonesia also has a public holiday to make space for the presidential election. From Europe comes EU IP and GDP, from UK there is CPI and a Bailey testimony, and for Fedspeak we have Goolsbee and Barr.