Bad data good for risk (and for mean reversion in yields)
OVERNIGHT NEWS
# Stocks up, bond yields and dollar down. Markets ignore below forecast Euro, UK and US PMIs. S&P on cusp of return over 3800 after highest close in three weeks. 2y/10y UST steepened to -26bp after US composite PMI slides to 47.3.
# Day ahead: Germany IFO business survey, US consumer confidence. Fed speaker Waller, BoE’s Pill. Hungary CB forecast to keep policy rate on hold, Brazil CPI. Germany and US benchmark auctions.
# UK: Rishi Sunak takes office as PM today after appointment by the King yesterday, new PM to make statement at 12.35pm CET.
# China: PBoC sets yuan fixing at 7.1668, lowest since 2008. Central bank also injects 230bn bn 7-day reverse repos to support liquidity, offset to tax payments and government bond sales. CNH falls to intra-day low of 7.3868.
# Nikkei +0.85%, EUR 10y IRS declined 10bp to 3.167% yesterday. Brent crude flat at $93.3/b, Gold steady at $1650/oz.
Yuan onshore/offshore gap has widened, signalling pessimism over the currency.

COP –COP performs in line with its Latam peers. USDCOP failed to break through 5000 level early on and dropped afterwards. Flow wise, our local trader Santiago Calvache has been seeing mixed flows this morning. We had RM outflows in cash and HFs inflows in NDF. We highlight the central bank rate decision on Friday later in the week.
Rishi Sunak set to become UK PM, gilts stage parallel ~30bp rally; BoE’s Ramsden notes UK fiscal policy is regaining credibility; USD/CNY at high since 2008, USD/CNH at record high; USD/JPY rises in volatile trading; Yellen says Treasury buybacks are “conceivable”; US 10y at 4.242% (+2.6bp).
Latin America:
Latam currencies depreciated despite a relatively flat USD in the session, but amid a large CNY and CNH depreciation. MXN was the exception and ended the session flat. BRL led the weakness, but for idiosyncratic reasons. BRL depreciated 2.7% to 5.31, after political headlines over the weekend portended a decline in support for the incumbent, which increased policy uncertainty. Both COP and CLP depreciated ~1.5% to 4990 and 986 respectively. PEN continued to weaken and depreciated 0.4% to end the session at the key level of 4.00, amid elevated levels of BCRP FX swap maturities this week in addition to external FX drivers.
Local rates ended mixed amid higher US rates. In Mexico, TIIE rates tracked US rates more closely than peers, as the 10y ended 5bp higher at 9.48%. Chile and Colombia stood out as outperformers as both the CLPxCAM and COPxIBR curves rallied moderately. 10y in CLPxCAM ended the session 3bp lower to 6.64%, while COPxIBR 10y ended 6bp lower at 11.67%. In Brazil, DI rates were the key underperformers as yields across the curve shifted 16-22bp higher in the session. January 2027s ended 21bp higher at 11.73%.