GEMs Daily Chile Strategy, Ukraine Trip Notes, Korea Rates

BofA Merrill Lynch Global Research - Lunes, 21 de Julio

• 
• 
• 
• 
• • 
  • 
  • 

releases in LatAm and EEMEA. Eyes in Europe will on be May industrial sales data out of Italy. In LatAm strategy, we open a new trade: long 5y inflation swap breakeven in Chile (entry 2.71%, target 3%, stop 2.5%). The market is underpricing future inflation in our view. There are no major data releases in the US today.  

LatAm: strategy - buy inflation breakevens in Chile. 

We open a new trade: long 5y inflation swap breakeven in Chile (entry 2.71%, target 3%, stop 2.5%). The market is underpricing future inflation in our view. Significant debt issuance by corporates has also put upward pressure in UF-linked rates, shrinking breakevens as a result. We expect debt issuance to decline in coming months.  (C. Irigoyen; E. Aguirre; page 2)

EEMEA: Ukraine trip notes - war fatigue 

We visited Kyiv last week and had an impression that there is a growing "war fatigue" on both sides. The crisis is becoming more localized within the Donetsk and Luhansk regions and, after the Malaysian plane crash, some resolution of the conflict is likely to happen, in our view. The IMF completed its 1st review of the program

Asia: Korea - rates rallied enough? 

Korea rates rallied sharply over the past month, as rate cut expectations sharply increased after dovish comments from new Finance Minister Choi. At this stage one 25bp cut by year-end is fully priced in. History suggests rate cuts that are priced in are usually delivered. As such, next Thursday's 2Q GDP is critical.   (A. Leung; page 6)

Chart of the Day ─ Chile's inflation swap breakevens well below 3% target

Source: BofA Merrill Lynch Global Research, Bloomberg

 Click here for full report*  

Please see full report for further details...  

[Volver]