MNI BRIEF: Canada Business Closure Rate Highest Since Pandemic

MNI CNB WATCH: More Easing, But Tight Policy Still Needed

MNI China Daily Summary: Thursday, September 26

MNI BRIEF: China GDP Growth Likely 4.8% In Q3 - BOC

EZ/UK Bond Supply Calendar: 5/5/10-Year BTPs / CCTeu Due Friday

US EIA:NAT GAS STORAGE +47 BCF TO 3,492 BCF SEP 20 WK

MNI: US NAR AUG PENDING HOME SALES INDEX 70.6 V 70.2 IN JUL

CANADA: Politics Week: Parliament Opens With Early Election Threats

AUSTRALIA: Albanese Lines Up Budget for May Election

AUSTRALIA: Albanese Lines Up Budget for May Election

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

MEXICO: Morgan Stanley Says Case For Dovish Banxico Is Still Live

MEXICO
EM BulletMexicoBulletGlobalEmerging Market NewsRegion
  • Morgan Stanley notes that growth expectations for Mexico are starting to fall somewhat faster than those implied for the US. At the same time, inflation trends remain benign and core CPI expectations continue to fall. That said, valuations in TIIE have deteriorated quite a bit over the last few weeks, in their view, as the implied terminal rate differential between Mexico and the US has fallen below 500bp over a two-year horizon, wiping out all the post-election risk premia.
    • MS believes taking on additional front-end Mexico rates risk at current levels has become primarily a US rates beta play, in an environment where Mexico's investment narrative continues to deteriorate structurally, with the FX as the main release valve.
    • They also note that uncertainty around the outcome of the US election remains quite elevated and struggle to see how certain parts of the local swaps curve can continue to outperform relative to US rates (though they wouldn’t look to pay outright).
    • In TIIE, MS adds 2y1y payers vs 2y1y SOFR receivers, targeting 535bp. In MBonos, they believe that valuations vs the US look less compressed. They continue to favour the belly of the curve (5-yr space) and expect 5s30s to continue steepening. In FX, MS stays bearish on MXN and would look to fade any breaks in USD/MXN below 19.00.
216 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • Morgan Stanley notes that growth expectations for Mexico are starting to fall somewhat faster than those implied for the US. At the same time, inflation trends remain benign and core CPI expectations continue to fall. That said, valuations in TIIE have deteriorated quite a bit over the last few weeks, in their view, as the implied terminal rate differential between Mexico and the US has fallen below 500bp over a two-year horizon, wiping out all the post-election risk premia.
    • MS believes taking on additional front-end Mexico rates risk at current levels has become primarily a US rates beta play, in an environment where Mexico's investment narrative continues to deteriorate structurally, with the FX as the main release valve.
    • They also note that uncertainty around the outcome of the US election remains quite elevated and struggle to see how certain parts of the local swaps curve can continue to outperform relative to US rates (though they wouldn’t look to pay outright).
    • In TIIE, MS adds 2y1y payers vs 2y1y SOFR receivers, targeting 535bp. In MBonos, they believe that valuations vs the US look less compressed. They continue to favour the belly of the curve (5-yr space) and expect 5s30s to continue steepening. In FX, MS stays bearish on MXN and would look to fade any breaks in USD/MXN below 19.00.