The US stocks mostly traded higher on Tuesday, S&P gained 0.3%, Nasdaq added 0.4%. Only Dow weakened (-0.4%) as it was under pressure from a sell-off of Boeing shares which lost 6.2% following the 737 max model being banned from European, Australian and other airspaces. The yield on USTs dropped following news from the UK and a weak inflation report – CPI MoM came lower than expected at 0.10%. The 10Y UST lost 4.1 bps in yield and closed at 2.5997% while the dollar index lost 0.3%.
Asian indices are trading in the red zone this morning, Hang Seng is losing 0.43%, Nikkei dropped by more than 1%. Japanese core machine orders fell lower than expected, it lost 2.9% in January. Some analysts believe that such a decline is a sign of weakening business investment and could lead the country’s economy into contraction.
Theresa May’s deal was defeated in the Parliament vote in a 391 to 242 manner. The implications for Britain are that it has to definitively decide on the procedures ahead of March 29 – the solutions range from extending Article 50 upon EU’s approval, to a potential no-deal exit. Debates have started regarding whether Mrs. May is fit to continue as the Prime Minister, hence another general election might be on the cards. The Pound was volatile throughout the day, being up 0.5% in early hours, going as high as 1% in the green, before eventually slipping to 0.4% down following the vote, trading at USD 1.3075 rate. The yield on 10Y UKT rallied 4bps up to 1.1622%. Later today the annual budget details will be released together with the spring forecast statement.
European officials in Brussels are preparing for discussions regarding further Brexit procedures. Despite three concessions on the backstop issue, Mrs. May’s deal was shut down in Tuesday’s parliament vote. Brussels officials stated there was ‘nothing more’ the EU could have done in supporting the Mrs. May’s deal, while a spokesperson of Jean-Claude Juncker stated that “if there is a solution to the current impasse it has to be found in London”. The Euro rallied on the lost vote, going from 1.1245 to USD 1.1288 rate. The yield on 10Y DBR slipped over 2 bps to 0.0571%.
The Russian ruble appreciated by 0.6% on Tuesday in line with EM peers, it closed at 65.92 per USD while the analysts from VTB Capital believe there is more room for strengthening, though 65.50 and especially 65.15 could provide a solid technical resistance. Russian sovereigns advanced, RUSSIA 47 reached mid 99 level. The corporates traded mixed: GAZPRU curve mostly advanced by 10-60 bps, while ROSNRM was the worst performer on the back on Pompeo comments regarding the company’s involvement in Venezuela, bonds lost around 20 bps.
In Latam, the investors were looking at PETBRA’s new issue yesterday, the company tapped USD 750M of its PETBRA 5.75% 29 and also issued USD 2.25 bn of new 30Y bond. However, most of PETBRA bonds lost 10-50 bps along the curve. Today Brazil and Mexico are expected to report their respective industrial productions. Analysts expect another fall, which would add to the signs of a global slowdown. Latam sovereigns traded mixed on Tuesday, BRAZIL 47 and MEX 48 advanced to lower 98 handle and mid 93 area respectively while ARGWNT 48 lost around half a point and finished around 74 level.