EM LATAM CREDIT: Codelco (CDEL; Baa1neg/BBB+/BBB+): Earnings, Copper Production
“Codelco FY Net Income $245M Vs. Loss $591.2M Y/y” - BBG
Neutral for spreads
• Government owned miner Codelco reported in 2024 full year revenues grew 3.7% vs 2023, producing USSD5.4bn of EBITDA and USD245mn of net income, according to Bloomberg.
• The company increased copper production marginally for 2024 but just enough to eke out BHP as the world’s largest copper producer.
• The company said in 1Q 2025 it shipped 50% more copper to the US y/y.
• US copper prices (COMEX) have soared ahead of a potential US tariff causing a record premium to London (LME).
• Codelco (CDEL) 10-year notes issued January 2025 at T+165bps were last quoted T+162bps. CDEL prices have been stable with spread movements driven by US Treasury volatility. So far the market has not been impacted by tariff headlines or copper prices.
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GILT AUCTION PREVIEW: On offer next week
The DMO has announced it will be looking forward to sell GBP4.25bln of the 4.375% Mar-30 Gilt (ISIN: GB00BSQNRD01) at its auction next Wednesday, March 5.
US DATA: New Home Sales Pull Back, Still Mitigating Existing Home Weakness
New home sales fell much more sharply in January than expected, but this was more than made up for by upward revisions.
- The 657k (SA annualized) of new single-family house sales were below the 680k survey - but December was revised a substantial 36k higher to 734k, meaning the actual 2-month total was 14k higher than the "expected" total.
- Sales fell in each of the 4 geographic regions in January, with the exception of the West.
- In terms of inventory, December now turns out to have had a sharp drop in months of supply (8.0, vs 8.5 pre-revision), but this rebounded sharply to 9.0 months in January.
- Median prices rose 3.7% Y/Y, the strongest since January 2024, to the 2nd-highest monthly price ever $446.3k (non-seasonally-adjusted - the record was $460k in October 2022) - the average in January was $510k.
- Bigger-picture, new home sales were down 1.1% Y/Y, so not exactly dynamic.
- But new homes continue to represent an unusually elevated proportion of supply (30%, vs half that pre-pandemic) and total sales (14-15%, vs 10% or lower pre-pandemic) as existing home sales growth stagnates amid high mortgage rates.
BUNDS: /SWAPS: Commerzbank Reiterate Shorts In Long End ASWs
Commerzbank write “although Schatz ASW spreads remain resilient, Bund ASWs are hitting new lows and even underperform against 30s as markets prepare for persistent fiscal slippage under the new German government. As the game of brinkmanship for fast-tracking new expenditures gathers pace, more volatility could be in store, but Bunds will struggle to regain their 'special' status, regardless of the eventual legislative details to free up fiscal space”.
- They suggest that “combined with converging duration free-floats across the 'pristine' global bond markets this implies further catch-up with U.S. Treasury and Gilt ASW structures”.
- Therefore, they reiterate structural shorts in (ultra-)long Bund spreads, both outright and vs. Schatz.
