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Morgan Stanley Note Banxico/BCCh Pricing Asymmetries

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  • Amid the obvious focus on BOJ/Fed meetings this week, Morgan Stanley do expect Banxico's meeting to also be quite eventful, as policymakers are broadly expected to deliver their first 25bp cut, likely via a split vote and with hawkish forward guidance.
  • Although the next BCCh decision is not until April 02, how to position for the upcoming cut has been a key discussion topic in many of MS’ recent investor conversations, as recent surveys and market pricing now point to a slower pace of easing.
  • Morgan Stanley believe that relative to market pricing, Banxico risks remain skewed to the hawkish side, in contrast to the BCCh, where MS believe risks are skewed to the dovish side now. Given this, they have introduced the following new trade recommendations:
  • Pay 9-month TIIE (target: 11.25%), receive 9-month CLPxCAM (target: 5.30%), long USD/CLP (target: 980). They also note they have closed the following trades: Long BRL/MXN, long BRL/CLP.
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  • Amid the obvious focus on BOJ/Fed meetings this week, Morgan Stanley do expect Banxico's meeting to also be quite eventful, as policymakers are broadly expected to deliver their first 25bp cut, likely via a split vote and with hawkish forward guidance.
  • Although the next BCCh decision is not until April 02, how to position for the upcoming cut has been a key discussion topic in many of MS’ recent investor conversations, as recent surveys and market pricing now point to a slower pace of easing.
  • Morgan Stanley believe that relative to market pricing, Banxico risks remain skewed to the hawkish side, in contrast to the BCCh, where MS believe risks are skewed to the dovish side now. Given this, they have introduced the following new trade recommendations:
  • Pay 9-month TIIE (target: 11.25%), receive 9-month CLPxCAM (target: 5.30%), long USD/CLP (target: 980). They also note they have closed the following trades: Long BRL/MXN, long BRL/CLP.