MNI China Daily Summary: Wednesday, July 31

MNI BRIEF: BOJ To Raise Further, No Clues on Timing - Ueda

MNI BRIEF: BOJ's FY26 Inflation View Flat; Upside Risk To FY24, 25 Prices

MNI: PBOC Net Injects CNY185.57 Bln via OMO Wednesday

MNI: PBOC Sets Yuan Parity Lower At 7.1346 Weds; -1.39% Y/Y

MNI BRIEF: China July PMI Contracts For Third Straight Month

Flash Inflation In-Line With Tracking; Services Softens But Only Slightly

MNI: EUROZONE JUL FLASH HICP +2.6% Y/Y

MNI: GERMANY JUL UE RATE (SA) 6.0% (FCST 5.9%); JUN 6.0%

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

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TIIE Swaps Curve Shifts Lower As Power Bill Debate Deferred

MEXICO
  • TIIE swap rates have fallen across the curve on Thursday. While largely in line with the substantial rebound for the Peso and moves in US yields, price action coincides with the local news regarding the developments of the President's energy initiative.
  • Reports from Reforma indicated the debate on electricity reform would be delayed, with lawmakers expecting to have Congress and local legislatures fully approve AMLO's nationalist electricity bill by mid-April of next year.
  • While there will undoubtedly be uncertainties surrounding the issue as we approach the later deadline, from a short-term perspective, creating more time may be easing the market's immediate fears and the associated risk premia.
  • Additionally, the central bank's 'more hawkish' stance may be called into question over the coming months. Despite the inflationary pressures prompting three consecutive rate hikes and potentially more in the pipeline, continued dissenters and a new Governor may increase the likelihood of a pause in the tightening cycle heading into 2022.
  • Indeed, most recently, BBVA have recommended a 1-year Mex-Chile swap receiver, expecting the spread to narrow, with a target of 70bps. Believing that the market "has gotten ahead of itself by pricing in 200 basis points in hikes in the coming months", according to a Bloomberg report.
  • Current levels for Mexico TIIE Swaps:
    • 1-yr -17 bps at 6.55%
    • 2-yr -20 bps at 7.10%
    • 5-yr -20 bps at 7.39%
    • 10-yr -15 bps at 7.56%
    • 32-yr -16 bps at 8.00%
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