BRAZIL: BRL was the star of the region with a 9.21% to 3.59 gain in the quarter, benefitting from the improvement in the global sentiment after the FOMC suggested that it will not hike as much as initially expected. The increasing possibility of a change in govt. has also given the market reasons for cheering. Gains were so strong that the BCB started to offer reverse FX swaps in March to reduce BRL gains after fighting most of the quarter to contain BRL losses. The Di curve reversed its steepening on same issues that affected BRL and Jan 17 dropped 199bps to 13.88% and Jan21 dropped 273bps to 13.89%. 5y CDS fell 129bps to 365. BOVESPA rose 15.2% to 49,926. Copom minutes suggested rate cuts may not come in the short term. Feb PPI manufacturing eased to -0.57%m/m, 9.7%y/y. Mar CNI capacity utilization at 77.6. Treasury sold its entire BRL7bn LTN offering with rates falling across the board.
MEXICO: MXN ended the quarter marginally negative at 17.28 after the last day of the quarter saw losses on a Moody's downgrade of rating outlook to negative. MXN started Q1 very weak but as the US FED signalled that it will not retire monetary stimulus as much as expected, and after Banxico forceful intervention, MXN staged a strong recovery. The Mbono/UST 10yr spread rose 18bps to 419. 1y IRS was up 45bps to 4.41% in the quarter. 5y CDS dropped by 8bps to 162 since Dec. MEXBOLSA climbed 6.75% to 45,881. Moody's downgraded the A3 ratting to negative from stable and Pemex BAA3.
ARGENTINA: ARS bucked the trend and weakened 13.7% in Q1 as the currency adjusted to supply and demand forces in the wake of the devaluation in Dec 2015. In the parallel exchange, ARS lost 6.0% YDT to 15.18. In the fixed income market, GDP Warrants NY Law rose 9.0% to 158 in Q1 on hopes of a quick resolution to the Holdout dispute while GDP Warrants BA Legislation strengthened 5.7% to 148 for the same time period and the same underlying reason. BONAR 2024 gained 8.7% in Q1 settling at 1,593. MERVAL spiked 11.3% to 12,992 in Q1.
CHILE: Despite a rocky start, CLP retraced all losses and strengthened 5.8% in Q1 closing at 667.7 supported by expectations the Fed will delay tightening. 1y IRS fell 15bps to 3.73% as weak activity prevented aggressive tightening. 5y CDS fell 34bps to 95 in Q1 2016. IPSA rallied 7.0% in Q1 to 3,937 amid rising USD inflows into EM assets. Feb Unemployment rate rose to 5.9% from 5.8% in the previous month.
COLOMBIA: COP rallied 5.4% in Q1 to 3,002 boosted by gains in oil prices, and expectations a slow path for interest rate hikes in the US. 1y IRS rose 27bps to 6.52% in Q1 on higher inflation. 5y CDS dropped 27bps to 215 in Q1 2016. IGBC soared 15.5% YDT to 9,871.5. Feb National unemployment came at 10%. urban unemployment beat forecasts at 10.3%.
PERU: PEN rose 3.1% in Q1 to close at 3.3129 tracking the EM FX gains as possibilities for monetary tightening in the US diminished. BCRP sold PEN1.28bn in the spot market to defend the currency and added PEN896mn to the CDR swaps maturity and PEN258mn in FX swaps liabilities during the quarter. 5y CDS retreated 28bps to 159.