EM LATAM CREDIT: Brazil's Petrobras (PETBRA; Ba1pos /BB /BB): Fuel Prices
“ 'It's time to look again', says Petrobras president about fuel prices” – Estadao
Neutral
• Oil prices have dropped about 14% since March month end so it makes sense for the Brazil government-controlled energy company to consider lowering fuel prices.
• The latest adjustment was made two weeks ago for diesel and gasoline prices have not been adjusted for 271 days according to the CEO of Petrobras Magda Chambriard as reported by Estadao.
• Ms. Chambriard reportedly said that she didn’t want the uncertainty about US tariff policy to be incorporated into the company’s decision about fuel prices.
• The recent decline in oil prices is partly due to concerns about economic weakness which may result from the U.S. imposition of tariffs. Global equity, fixed income and commodities markets have been volatile lately because of uncertainty regarding U.S. tariff policy.
• The Brazil government has a 36% economic stake in Brazil based energy company Petrobras and has 50.3% of the voting rights. Petrobras has an 82.3% share of the fuel distribution market in Brazil and more than 90% of the crude oil output in Brazil, according to Statista.
• With such a meaningful share of the country’s fuel market, the company is influenced by government policies and control.
• PETBRA 2035s issued September 2024 at 6.25%, which was about T+242bps at the time, were last quoted T+268bps which was 12 bps wide to the sovereign.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
