EM LATAM CREDIT: Colombia: Cancels IMF Flex Line – Neutral
(COLOM; Baa3/BBneg/BB+neg)
• A “very strong” assessment of fiscal policy and framework is required to earn a Flexible Credit Line (FCL) which is a backup line made available to those not needing immediate loans such as an Extended Fund Facility (EFF). The IMF concluded that Colombia no longer qualified for an FCL given its suspension of their Fiscal Rule and rising fiscal deficit. Soon after, Colombia responded by cancelling the line saying it wasn’t necessary.
• This issue is a non-event for the moment, though it does highlight the fragility of Colombia’s finances. Colom recently borrowed in EUR and CHF to buy back USD debt which meaningfully lowered yields on their USD bonds for now but the country is still running north of a 7% budget deficit so its financing needs will still be considerable. COLOM 35s were last quoted T+277bp, 89bp tighter since June 30th and 54bp tighter YTD.
• The IMF noted that international reserves were adequate and continued to be strengthened, having reached the ARA metric of 131 at June 2025 which is a measure of reserves sufficiency, so Colombia is probably right that it doesn’t need the FCL right now but neither does Chile (CHILE; A2/A/A-) that has a USD13bn FCL that it is not using and likely to reduce going forward.
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EGB FLOWS: EUREX Roll Pace (updated)
- Buxl: 39%.
- Bund: 28%.
- Bobl: 50%.
- Schatz: 44%.
- BTP: 20% (below pace).
- BTS: 30%.
- OAT: 31%.
US: FHFA's Pulte Maintains That Cook Mortgage Allegations Are Authentic
FHFA's Pulte sticks to his claims that his allegations against Fed Governor Cook of mortgage fraud on three separate occasions are authentic, whilst briefly touching on the housing emergency declaratiothat has been floated by Tsy Sec Bessent.
- "*PULTE ON FED'S LISA COOK: DOCUMENTS ARE AUTHENTIC
- *PULTE: POWELL NOT HOLDING LISA COOK ACCOUNTABLE
- *FHFA DIRECTOR PULTE SPEAKS ON FOX BUSINESS" - bbg
A reminder that we could see headlines from the Fed Gov. Cook court case after US District Judge Jia Cobb on Friday asked Cook’s lawyers to file a brief today spelling out their arguments for why Trump’s firing of Cook was unlawful. This is a case that seems likely to ultimately end up in the Supreme Court.
- "*PULTE: TRUMP FOCUSED ON GETTING HOUSING MARKET BOOMING
- *PULTE ON HOUSING EMERGENCY: WE ARE LOOKING AT WHAT IS AVAILABLE" - bbg
Bessent yesterday told the Washington Examiner that Trump may declare a 'national housing emergency' this fall to address rising house prices.
GILTS: 30-year gilt yields break to highest levels since 1998
- 30-year gilt yields have broken above the high of April and moved to their highest level since May 1998.
- At present the 30-year yield is up 5.7bp since yesterday's close and has also breached 5.70%. Our technical analyst notes a move to 5.74% is plausible.
- The break higher comes amid broader concern regarding UK assets with GBP FX seeing a notably selloff on the gilt open at 8:00BST this morning. The global backdrop is not favourable, of course, but with the UK fiscal position looking bleak and the date of the Autumn Budget still not yet known (and looking increasingly likely to be November or December as we noted last week). This is just adding to further uncertainty about how the UK deals with its fiscal issues with the government still pledging it will stick to its fiscal rules but also showing no appetite to break its manifesto pledges of not increasing income tax, VAT or employee national insurance (the easiest levers to increase revenues).
- However, the DMO has managed to raise a record GBP14bln in its syndicated 10-year transaction today - so there is still strong demand further down the curve if the price is right.
- Our technical analyst notes that the move higher in yields confirms a resumption of the primary uptrend now that the key resistance at 5.66%, the high print on Apr 9, has been cleared. Moving average studies are in a bull-mode position highlighting a dominant uptrend for yields. Scope is seen for a climb towards 5.74%, a 1.236 Fibonacci projection of the Jun 13 - Jul 18 - Aug 5 price swing. First key support lies at 5.55%, the 20-day EMA.
Source: MNI, Bloomberg Professional Finance LP
