Itaú BBA - Latam FI Strategy Monthly
  • Weekly FI LatAm Strategy: Taking profits in our Colombia vs. Chile trade idea  

    We are taking profits on the trade with a 15bps gain.

  • Weekly FI LatAm Strategy: Confirmation hearing of new BCB governor to take place on Tuesday  

    We have no position in Brazil’s rates today, amid uncertainties towards the pension reform discussion

  • Weekly FI LatAm Strategy: Pension reform to be sent to Brazilian Congress  

    We prefer to be on the sidelines for now, as this long process of the reform in Congress involves significant risk

  • Weekly FI LatAm Strategy: Higher premium due to higher uncertainty on pension reform in Brazil  

    We stepped out of our receiver at the long-end of real rates last Wednesday with a 29bps gain

  • Taking profits in Brazil’s long-term real rates, as pension reform approval may be delayed – Fixed I  

    We are tactically stepping out of our receiver position in Brazil’s NTN-B 2050 at 4.51% (reference price), taking profits after a 29bps gain

  • Weekly FI LatAm Strategy: Long-end real rates in Brazil to continue tightening  

    We continue receive the NTN-B 2050 real rate in Brazil, as central banks in Brazil and Mexico are set to stay on hold this week.

  • Pay 1y local rate in Chile and receive 1y rate in Colombia – Local Rates Trade Idea  

    We forecast 100bps in hikes in Chile and 50bps in Colombia this year.

  • Weekly FI LatAm Strategy: Elections for Congress speakers in Brazil; Chile to hike; Colombia to stay  

    In the Lower House, the reelection of Rodrigo Maia is, according to local news (Valor, Estado), the likely outcome

  • How much can market long-term real rates decline in Brazil? - Fixed Income Strategy  

    The real rate of Brazil’s long-term bonds can decline to 4.0% (or below) if the pension reform is approved.

  • Weekly Fixed Income LatAm Strategy: Davos meetings in focus  

    We continue to receive the NTN-B 2050 real rate (now at 4.59%).

  • Weekly Fixed Income LatAm Strategy: We continue to receive long-term real rates in Brazil  

    Approval of the pension reform will be an important trigger for lower long-term rates.

  • Weekly Fixed Income LatAm Strategy: The rally in Brazilian rates continues  

    The Brazilian market is becoming more constructive on the reform agenda.

  • Extend Duration in Brazil – Local Rates Trade Idea  

    We recommend receiving NTN-B 2050 at 4.84%.

  • Weekly Fixed Income LatAm Strategy: We expect Brazil to keep rates stable this week  

    The BCB will likely keep the SELIC rate at 6.5% and indicate that the balance of risks has again become symmetric

  • Weekly Fixed Income LatAm Strategy: We expect Chile to keep rates stable this week  

    We expect the Chilean central bank to keep the policy rate stable at 2.75%, while the market is divided between stability and a 25bps hike.

  • Weekly Fixed Income LatAm Strategy: EM Relief?  

    This is a key week for Emerging Markets, as a trade truce between U.S. and China may reduce risks to the global economy

  • Weekly Fixed Income LatAm Strategy: Brazil rallies on positive news; Mexico undeperforms  

    Signs of improvement in the global scenario for EMs have been benefitting Brazil, Colombia and Chile.

  • Feedback from Asia trip on Brazil – Fixed Income Strategy  

    The post-election scenario is generally seen as positive.

  • Weekly Fixed Income LatAm Strategy: Banxico to hike; in Brazil, all eyes on the new economic team  

    We expect Banxico (Thu.) to hike by 25bps to 8.0%, and do not rule out a 50bps increase

  • Taking Profits on our Receiver in Brazil – Local Rates Trade Idea  

    We recommend taking profits on our receiver position in Brazil.

  • Weekly FI LatAm Strategy: All eyes on cabinet names in Brazil; taking profits on our receiver in CO  

    Our DI Jan 21 receiver currently posts a 100bps gain, and we are keeping it for now.

  • Weekly FI LatAm Strategy: Stopping out of our 5Y TIIE receiver in Mexico  

    We now expect Banxico to hike 25 basis points on November 15th.

  • Weekly FI LatAm Strategy: Bolsonaro wins election in Brazil, Copom to keep rates stable this week  

    We continue to receive local rates in Brazil.

  • Weekly Fixed Income LatAm Strategy: Keep receiving in Brazil, Mexican CPI on focus  

    We are keeping our receivers in Brazil, despite acknowledging that there may be less upside now.

  • Weekly Fixed Income LatAm Strategy: We continue to receive rates at the belly of the curve in Brazil  

    We believe the belly (specifically Jan 21) is the best part of the curve to receive

  • Weekly FI LatAm Strategy: Receive local rates in Brazil, as election uncertainty declines  

    We recommend receiving DI Jan 21 outright.

  • Weekly FI LatAm Strategy: NAFTA deal, MX rates started to tighten last week, Banxico to stay on hold  

    We continue to receive local rates in Mexico and Colombia.

  • Weekly Fixed Income LatAm Strategy: Banrep to stay on hold  

    We expect Banrep to keep the policy rate stable at 4.25%.

  • Weekly FI LatAm Strategy: Copom to keep Selic rate stable at 6.50%, all eyes on electoral  

    Prices in the front-end of the yield curve imply a 14bps hike in this meeting, and substantial monetary policy tightening after the elections

  • Weekly Fixed Income LatAm Strategy: All eyes on election polls in Brazil  

    We have no position in Brazilian local rates today, due to domestic uncertainties

  • Weekly Fixed Income LatAm Strategy: Chilean Central Bank to remain on hold  

    Trump’s decision on tariffs against China will be the highlight of the week.

  • Weekly FI LatAm Strategy: We continue to receive local rates in MX (FX hedged) and CO (outright)  

    We have no position in Brazilian local rates since the end of June, because of the domestic uncertainties

  • Weekly Fixed Income LatAm Strategy: A possible decline in trade-war risk would benefit Mexico and Ch  

    Keep an eye on global trade negotiations this week

  • Weekly Fixed Income LatAm Strategy: Depreciation in EM currencies creates opportunities  

    Receiving the front-end of local rates in Brazil seems interesting again.

  • Weekly Fixed Income LatAm Strategy: Colombian CPI and Banxico on hold benefit our receivers  

    We continue to receive local rates in Mexico and Colombia.

  • Weekly Fixed Income LatAm Strategy: Copom and Banxico to keep rates stable  

    We continue to receive Mexican 5y local rates, with FX hedge

  • Weekly Fixed Income LatAm Strategy: Receive 5y rate in Mexico with FX hedge  

    The main risk for a receiver position is, in our view, the global trade war, which requires some protection by hedging FX

  • Weekly Fixed Income LatAm Strategy: Time to receive Mexican local rates?  

    MXN has been appreciating substantially, but local rates have not followed the same path.

  • Weekly Fixed Income LatAm Strategy: Front-end of Brazilian local rates continues to imply rate hikes  

    We expect the Selic rate to remain stable in upcoming meetings.

  • AMLO stronger than expected in Mexican election  

    According to a quick count, AMLO received a higher share of votes than expected

  • Taking profits on the front-end of Brazilian local rates – Local Rates Trade Idea  

    Our base-case remains that BCB will keep rates stable in upcoming meetings, and the yield curve pricing still implies rate hikes.

  • Weekly Fixed Income LatAm Strategy: We continue to receive the very front-end of local rates in BZ  

    The decline in rates caused gains to our received position in DI Oct-18 (+0.08%, unleveraged).

  • Weekly Fixed Income LatAm Strategy: BCB to keep Selic rate stable at 6.5%  

    We believe BCB will keep the Selic rate stable this week

  • Receive the very front-end of local rates in Brazil – Local Rates Trade Idea  

    We believe BCB will keep the Selic rate stable this week

  • Weekly Fixed Income LatAm Strategy: Another strong USD trade this week?  

    Keep an eye on the Fed meeting, and the behavior of Latam currencies this week.

  • Weekly Fixed Income LatAm Strategy: Focus on CPI releases in Mexico and Colombia, and NAFTA news  

    The pricing of local rates in Mexico seems excessive, but now is not the right time to receive.

  • Weekly Fixed Income LatAm Strategy: Waiting for a Nafta deal to receive Mexican local rates  

    We will receive Mexican rates if/when a Nafta deal is announced.

  • Tactically out of receiving position in Mexico, waiting for a NAFTA deal – Local Rates Trade Idea  

    We will step out tactically, but continue to monitor the trade, and receive again if a NAFTA deal is announced

  • Weekly Fixed Income LatAm Strategy: Last rate cut in Brazil, Mexico on hold  

    We expect Brazil’s central bank to cut rates, and Mexico’s to stay on hold.

  • Weekly Fixed Income LatAm Strategy: New fiscal targets in Argentina, feasible but ambitious  

    Argentina remains vulnerable to tightening global financial conditions.

  • Stepping out of Argentina – Sovereign Debt Trade Idea  

    We are stepping out of our position long Argentina’s CDS against the Latam average

  • Weekly Fixed Income LatAm Strategy: Argentina hikes 300bps while Colombia resumes easing  

    Colombia reduces its policy rate by 25bps unanimously, as Argentina sharply hikes its policy rate by 300bps

  • Weekly Fixed Income LatAm Strategy: Colombia to resume easing  

    We expect Banrep to cut the policy rate this Friday, with some debate about stronger easing.

  • Weekly Fixed Income LatAm Strategy: Receive Mexican rates outright  

    We are receiving outright 3y TIIE rates at 7.37 for Mexico

  • Take profits in Brazil and Receive Mexico Outright – Local Rates Trade Idea  

    Will believe Mexican rates will normalize ahead as inflation declines.

  • Weekly Fixed Income LatAm Strategy: Mexico to stay on hold, Argentina expected to hike  

    We expect the Central Bank of Mexico to stay put, while the Argentine is expected to hike the 7-day repo rate by 50-bps.

  • Important political week in Brazil, CPI in Colombia  

    This week in Brazil, keep an eye on the political news flow and economic activity data

  • Weekly Fixed Income LatAm Strategy: We continue to receive DI Jan-21 rate in Brazil  

    We continue to receive Brazil DI Jan 21, because we believe a wide output gap will maintain inflation well contained

  • Stepping out of the short Colombia CDS – Sovereign Debt Trade Idea  

    We are stepping out of a short position in Colombian CDS

  • Weekly Fixed Income LatAm Strategy: Watch out for policy rate decisions in Brazil and Colombia  

    We continue to be received in the belly of the local rates curve in Brazil and the front-end in Colombia.

  • Stay received in the belly of Brazil and front-end of Colombia local rates  

    Stay received in the belly of Brazil and front-end of Colombia local rates

  • Weekly Fixed Income LatAm Strategy: Stay received in Brazil despite the rally  

    We will maintain our DI Jan21 receivers because we think the yield curve is still too steep.

  • Weekly Fixed Income LatAm Strategy  

    Brazil’s DI yield curve flattened substantially on Friday after (CMN) decided to revoke resolution 4.444 from 2015.

  • HANDBOOK - Argentine Sovereign Fixed Income and Foreign Exchange Markets  

    In this report, we describe the federal debt and exchange rate markets in detail, providing a reference guide for investors.

  • Receive 3y and pay 1y rates in Mexico’s local curve – Local Rates Trade Idea  

    We recommend paying the 1-year rate at 8.08% and receiving the 3-year rate at 7.89%, DV01 neutral

  • Reinforcing receivers in Brazil and Colombia local rates  

    We hold a receiver in the belly of the Brazilian curve in order to profit from the sizable premium still embedded in it.

  • Receive Colombian 18m IBR rates again as yield curve prices in almost no rate cuts ahead – Local Rat  

    Despite the board’s hawkish message, we see room for additional easing ahead.

  • Receive Brazilian local rates as inflation remains low and election risk declines – Local Rates Trad  

    We recommend receiving DI Jan21 at 8.78%.

  • Colombian risk premium to increase ahead  

    The fiscal challenge, a wide current account deficit and less favorable financial conditions will pressure Colombia’s CDS.

  • Taking profits on Colombian local rates – Local Markets Trade Idea  

    We believe the yield curve pricing is now fair, and therefore we are taking profits on the trade.

  • Buy Protection in Colombia 5y CDS – Sovereign Debt Trade Idea  

    We believe markets will price in higher chances that Colombia will lose its investment grade; buy protection in 5y CDS.

  • Reform effort opens opportunities in Argentina  

    After the result of the mid-term elections, Argentinian government is pushing for reforms to achieve fiscal consolidation.

  • Argentina’s CDS to continue outperforming its Latam peers – Sovereign Debt Trade Idea  

    We believe that the difference between Argentina’s 5y CDS spread (239bps) and the average of Latam ex-Argentina (102bps) will continue to narrow going forward.

  • Banrep’s surprising rate cut caused gains to our receiver position  

    We are received in the 18-month IBR swap; the trade is performing well so far and we expect it to improve further ahead.

  • Bearish on the COP, amid mounting pressures in core yields  

    The slow adjustment of Colombia’s current account deficit renders the COP the most vulnerable LatAm currency to a re-pricing of core yields.

  • Weak activity and stable currencies leave room for further monetary easing in LatAm  

    We expect a pause in Banrep’s easing cycle, but there are risks of a more front-loaded cycle.

  • Receive 18m IBR rates in Colombia as non-tradable inflation starts to fall - LatAm FI Trade Idea  

    We recommend receiving the 18-month IBR rate, at 4.87%.

  • Brazilian curve poised to flatten  

    Barring a shock, we see room for the Brazilian nominal curve to flatten ahead.

  • HANDBOOK - Brazilian sovereign fixed income and foreign exchange markets  

    We describe in detail the Brazilian federal debt and exchange rate markets, shedding light on their idiosyncrasies.

  • Oil increases duration-risk in Mexico and Colombia  

    We see limited room for further compressing of Mexican yields, given the fiscal impact of the oil rout.

  • Reform doubts suppress Brazilian rates  

    The more challenging fiscal scenario keeps Brazilian yields at a standstill.

  • Fiscal reform uncertainty impacts Brazilian assets  

    Overcrowding exacerbated the impact of recent news, as players were anticipating a rally if the pension reform was approved in the House in the short term.

  • Global growth buoys LatAm assets  

    MXN outperformed on the positive global landscape; BRL showed resiliency to the negative domestic news

  • Brazilian rates’ bull market is not over  

    Negative domestic news prompted players to take profits in Brazilian rates, but we see room for further compression

  • Brazilian rates stand to benefit from virtuous cycle  

    We hold a structurally bullish view on Brazilian rates even though our tools show little mispricing at current prices.

  • Brazil to outperform peers in new external environment  

    The adjustment of Brazilian external accounts in 2016 and the ongoing fiscal reforms contrast with uncertainties on other EMs.

  • Copom likely to speed up easing in 2017  

    After a string of positive recent events the market started to price-in an acceleration in the easing cycle.

  • Brazilian rates will likely retrace as the external landscape becomes clearer  

    The recent sell-off in Brazil seems exaggerated to us, as the domestic story for local rates remains positive.

  • LatAm markets remain stable, but the risks are mounting  

    Our analysis indicates that non-economic factors have played a role in the performance of the MXN, the Cop and the BRL.

  • Still Favorable (Albeit Volatile) Environment for LatAm  

    LatAm currencies are being quoted in line with our estimates, except the MXN which is still oversold

  • The Search for Yield Supports Local Rates  

    The rally in the Brazilian rates took a breather, but inflation expectations have reacted to BCB’s guidance

  • The Low-Rates Environment Lingers  

    The uncertainties over global growth triggered by the Brexit have pushed down DM and LatAm yields alike.

  • Favorable Global Environment, Even If Volatile  

    The BRL is trading near our model’s estimate, but our numbers indicate that the MXN is oversold.

  • External tailwinds continue to back LatAm assets  

    LatAm FX is matched with our estimates; we see some mispricing in short Mexican yields and on Colombian breakevens

  • Relief for EM Assets Amid Global Stimulus  

    We investigate how shocks to expectations affect the Brazilian curve, which inverted in March - edging closer to our scenario.

  • A Broad-Based Rally in Latam Assets  

    After a bumpy start of the year, local FX appreciated again; we analyze MXN returns from technical and econometric perspectives.

  • Uncertainties Linger in Global Markets  

    In FX, the highlight was the hefty depreciation of the MXN; in rates, Colombia’s risk premium increase

  • Global Growth Concerns Increase Markets Volatility  

    Given the turmoil at the start of the year, LatAm FX depreciated earlier than expected.

  • Sidelines in Brazil, Payers Elsewhere: PART 2: RATES  

    The heightened (domestic and external) uncertainty warrants defensive positions

  • Flat on Currencies for Now  

    Our fair-value models were pointing to short-term “richness” in most Latam currencies

  • Cautiously Positioned Ahead of Liftoff  

    We maintain a conservative approach as the market isn’t convinced about the speed of the U.S. rate normalization process ahead

  • Paying Back to the Recent Rally  

    Since we view the current “carry-appetite” in global markets as temporary, this recent rally created some opportunities.

  • On the Sidelines, With a View to Sell  

    In Brazilian rates, we recommend an underweight position, in search for entry points to re-load steepeners and payers.

  • Minding FX and Spillovers  

    However partly anticipated, upcoming rate normalization in U.S. may further strengthen the USD and pressure higher U.S. yields.

  • Waiting for the Liftoff  

    The expected process of monetary policy normalization in the U.S. will add pressure on Latam FX and yields ahead.

  • Adding Steepeners  

    We are recommeding steepeners in Brazil and Mexico.

  • Adding Payers, Gradually  

    In Latam rates, the front-end shows the monetary policy outlook fairly priced, whereas for the back-end we see upward pressures ahead

  • Skeptical About the Bull-Ride  

    Latam FX and rates rallied over a month’s time, powered by a better sentiment

  • Bracing for the Fed’s liftoff  

    Fair value models confirm that BRL and COP are the most vulnerable pairs (to US rate hikes) in Latam

  • Is it time to pay (rates)?  

    In Latam, not only currencies continued to weaken, but also yields started moving higher


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