OVERNIGHT NEWS
# Dollar renews slide after biggest 2-day drop since last May, 10y UST off 1.709% low. Techs flag possible extension of EUR/USD to 1.15. Sterling unfazed as PM Johnson defies calls to resign, Conservatives sink 10pts behind Labour in YouGov poll.
# Fed vice chair nominee Brainard says getting inflation back down to 2% while sustaining an inclusive recovery is the Fed’s “most important” task. Bullard (FOMC voter) backs four rate hikes this year, says important to start “sooner rather than later”.
# China: PBoC fixes yuan midpoint at 6.3542, one-month low but 60pips above consensus highlighting resistance to CNY appreciation. Banks are property stocks drop on report at least five Chinese banks are restricting property loans.
# Nikkei -0.9%, EUR 10y IRS +1.5bp to 0.379%, Brent crude -0.5% at $84.3/b, Gold flat at $1,825/oz
Supply constraints virtually resolved in Europe but not in the US
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Latin America:
Latam currencies strengthened amid a weaker dollar and improved global risk sentiment. BRL and DI rates led the region in both FX and Rates performance during the session. BRL rallied 0.9% to 5.53 while DIs declined by roughly 20-30 basis points across the curve, bull-flattening with the Jan 24s lower by 25bp to 11.20%, while Jan 33s ended lower by 20bp, to 11.34%. Local news flows in Brazil was mostly quiet during the session.
In Chile, CLP also saw strong performance, strengthening by 0.7%, to 823.5, during the session. Rates bull-flattened by 1bp, to -21bp, with the 2yr CLPxCAM ending lower by 4bp, to 6.11%. After the close, the Ministry of Finance reported it expects an additional US$4.3bn in tax revenue (an increase of +6.8% from earlier estimates). In Mexico, MXN was little changed, with TIIE rates continuing to bull-flatten, particularly in 1s10s where the curve flattened 4bp, to 60bp. The 10yr TIIE ended lower by 8bp, to 7.645%
