Mexico CPI day: the 10Y climbs to 4.81% and the peso holds at 16.89

Good morning!

Mexico's calendar carries the weight today: INEGI prints inflation and that number sets the tone for the local session. I don't have it confirmed at this hour (it lands almost as this email goes out), so I'm parking it and will close the loop tomorrow. The backdrop isn't friendly: WTI strings together +3.00% to 95.82, and expensive crude is the last thing a treasurer wants ahead of a price print.

US yields up, peso glued to the floor

The 10-year Treasury climbs to 4.81% (+0.12), and by the textbook, with a 20-day peso-to-Treasury correlation near +0.35, that should push USD/MXN higher. It didn't: the currency settled at 16.8960 and opens 5 centavos above support at 16.8487. That's what nags me today, the peso shrugging off the long end of the US curve, though at +0.35 the link is loose rather than binding, so I'm not shocked it breaks in patches.

Staying long the peso, with the line redrawn

Yesterday I drew it this way: I'd drop the long if the pair reclaimed 17.0435 with the 10Y held above 4.80%. The yield cleared 4.80 (it now sits at 4.81%), but the peso went the other way, flirting with its floor, and my condition needed both legs. Only one printed, so the constructive bias stays.

For today, while the pair respects the 16.85 zone, the currency keeps the upper hand. I step aside if it rebounds toward 17.04 or if this morning's CPI runs hot enough to move Banxico pricing. The peso sits more than 3 ATR below its 20-day average, stretched enough to tempt a bounce call, yet that stretch doesn't foreshadow a reversal; I read it as technical color and nothing more.

Lukewarm risk and a score that ends the slide

Offshore the picture is mixed: the S&P slipped 0.58% and futures point down 0.36%, but Bitcoin bounces 1.50% to 79,617 and gold adds another 0.96%. VIX at 16.42 and MOVE at 76.14 say guard up, not stress, and the US curve keeps a positive slope, 0.41pp on the 2s10s, with no recession signal to spook the carry.

That lifts the Risk On to 57 (CONSTRUCTIVE) from 52, snapping three sessions of decline. The bounce comes from the firm peso and contained vol, not from US equities, which stay heavy. Underneath, the rate gap over the Fed keeps anchoring the currency. In Chicago, speculators remain net long the peso, 93,247 contracts as of Sep 1 and still adding: positioning rather than today's flow, though the consensus hasn't let go. What actually moves your day is INEGI, and Friday's US CPI; until then, the 16.85 floor is the test.

— See you tomorrow for Thursday's view.