EM LATAM CREDIT: Brazil's Eletrobras (ELEBRA; Ba2/BB/BB-neg) 2024 Earnings
“Eletrobras 4Q Adjusted Net Income Misses Estimates” - BBG
Neutral for spreads
• Brazil’s largest vertically integrated electric utility 43% owned by the government, privatized in 2022 announced solid results. ELEBRA 2035 bonds issued September 2024 at 6.75%, T+300bps were last quoted T+256bps and have generally tracked the sovereign with a lag due to liquidity. The 2035 bonds were quoted 15bps wide to the sovereign.
• 2024 Revenues rose 7% y/y while net profit was up 136% driven by an 11% increase in the transmission segment. 2024 EBITDA grew 51%. Gross debt rose 27% but thanks to strong cash generation net debt fell 6%.
• A recent positive news development was last week’s settlement of a government lawsuit capping the company’s liability to help complete the Angra 3 nuclear power plant in return for granting the government more seats on the board of directors.
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STIR: Next Fed Cut Not Fully Priced Until December Following CPI
Unequivocally hawkish market reaction to the firmer-than-expected CPI data.
- The next 25bp Fed rate cut is now not fully discounted until the end of the December FOMC. That move was fully priced through September ahead of the release, with 37bp of cuts showing through December pre-data.
- FFZ5 briefly prints 1.0 tick above its January low.
- SFRZ5 briefly prints 2.5 ticks above its January low.
BUNDS: Falls 41 ticks post US CPI
- Bund has fully closed the gap down to 132.34, and extended as low as 132.19 following the beat in the US CPI, it fell a total of 41 ticks post Data.
- Looking at Technical, focus will be on the Yield and the 2.50%.
- Today, reference 132.26, this level equates to 131.99.
US TSY FUTURES: BLOCK: March'25 2Y Post-Data Buy
- +10,000 TUH5 102-18, buy through 102-17.62 post time offer at 0834:05, DV01 $370,000. The 2Y contract has since traded down to 102-16.75 last (-5.62).
