Overnight markets got little help from supposedly positive debt ceiling talks between US Pres Biden and House Leader McCarthy, as global yields continued their grind higher in flattening fashion amid US default risks and increased corporate debt issuance plans. SPX futures are down 0.1/2% while the USD strengthens against nearly all majors, WTI crude oil trades flat, and iron ore and copper take another hit (2.2% and 1.6%, respectively). The overarching market mood will remain driven by debt ceiling headlines, while the release of US PMIs at 9.45ET may play a supporting role.

Another sleepy session awaits Latam markets from a local calendar perspective with no major data scheduled for release and no events of note ahead; Chile’s central bank’s Financial Stability Report this evening is a secondary consideration. Ahead of the INEI’s release today of Peruvian Q1-GDP, with data from the BCRP showing a 0.4% y/y contraction in Q1, the central bank’s head Velarde said he still expects inflation to fall to 3% by year-end—a highly optimistic forecast, in our view. Colombian markets reopen after yesterday’s holidays.

We’re watching political developments in Mexico as influences on the country’s assets while we count down the hours to tomorrow’s H1-May CPI release where economists anticipate another decline in headline and core inflation. The Citibanamex economists’ survey results published yesterday showed that respondents projects the first Banxico cut, of 25bps, to come in Q4-23 or Q1-24, though the median still sees the overnight rate closing the year at the current rate of 11.25%.

In Brazil, analysts polled for the BCB’s weekly survey lowered their projections for inflation at year-end (from 6.03% to 5.80%) on the back of last week’s Petrobras fuel prices reduction. This, however, was not accompanied by a lower forecast for the BCB’s policy rate, and bank Pres Campos Neto said yesterday that core inflation expectations remain very high, reinforcing projections that a rate cut will have to wait.

—Juan Manuel Herrera