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Citigroup LatAm Economics & Strategy Daily Summary - June 13, 2025

Overview

• Market Focus: Developments in Brazil, Chile, Argentina, and Peru; Middle East tensions driving oil prices and dollar strength.
• Next Focus: Colombia's Medium-term Fiscal Framework.

Key Updates

Brazil

• Lula Approval: Approval rate dropped to 28%, disapproval to 40% (similar to April). Vulnerable compared to first term (approval was 36% in June 05).
• Retail Sales: Core and broader retail sales fell sharply in April (YoY -4.8%, -0.8% respectively). Leads to concerns about slowing private consumption.
• Brazilian Market: Position in Argentina cash-funded by Peru (duration-neutral); Mexico OW duration position; Brazil revenue trades.

Chile

• BCCh (Central Bank) Poll: Consensus expects June pause (rates median 5.00%) and 25bp cut later (to 4.75% by July 29). Inflation expectations slightly lower.

Argentina

• CPI Inflation: May increase of 1.5%, lowest YoY since April 2020. YoY 43.5%. Core CPI was 2.2%. Supports Milei's governability, impacting debt markets.
• BCRA: CPI data to influence fixed income auctions.

Peru

• BCRP: Reference rate unchanged as expected. Economic activity near potential, but growth prospects worsened due to trade restrictions. Central bank guiding toward center-rate policy adjustment if data requires.

LatAm Priced-In and Carry

Brazil

• Annuities (IRS 31s) receive (9.25% target); Mexico F-TIIE vs SOFR.
• 10y terminal rate ~12% (up 35bps from Sep).
• 3m carry & roll: Net steepener (1m-4m FRA-priced tight).

Mexico

• Cross-currency basis persistent (3m roll: Steeper drives UDB).

Chile

• Insurance bonds (7s currently at 4.41%). 1s & 2s low curve expected this year.

Colombia

• 1s & 2s spreads narrow due to rate cuts expectations.

Other Notes

• Middle East Tensions: Government concern over conflict escalation and US mediation role.
• Data Calendar: Next week features Peru, Brazil, Chile, Argentina economic releases.
• 1M implied volatility (MXN, BRZ, COP) spiked recently.

Analysts

• Ernesto Revilla, Luis E Costa, Esteban Tamayo, Laura Bertran, etc.

Disclaimer Section Note

• Citigroup analysts certify independence, disclose conflicts, and prohibit sharing recommendations; specific limitations apply.