EM LATAM CREDIT: COLOMBIA: JP Morgan Sees Wider Deficits From Fiscal Slippage
• Amid spending pressures, lower-than-anticipated revenues, and the absence of binding fiscal rule restrictions ahead of an election year, JP Morgan expects wider primary fiscal deficits for 2025 and 2026 than those projected by the fiscal authorities. The primary fiscal deficit for this year is now projected at 3.0% of GDP, consistent with a headline deficit above 7.5%, though forecast risks remain skewed towards a wider deficit. For 2026, JPM sees a 2.5% of GDP primary deficit.
• Given the revenue overestimation experienced both this year and in 2024 and the proximity to presidential elections, JPM are cautious regarding the administration's ability to approve a tax reform and increase revenues in 2026, signalling that spending adjustments are needed. Fiscal consolidation envisaged for next year, exclusively based on increasing revenues, might not unfold, and a wider fiscal deficit is expected unless spending is adjusted.
• The fiscal data released for April confirm that fiscal slippage persists, with the primary deficit standing at 1.3% of GDP YTD and headline deficit at 2.8% of GDP, increasing by 0.8-pt from 2024. On a 12-month basis, the primary deficit reached 3.0% of GDP by April, while the headline deficit sits at 7.5% of GDP.
• Further ahead, JPM’s fiscal proxy suggests that the primary deficit would have stood at 1.9% of GDP through June, driven by increased spending and lower-than-expected revenues. This compares to a 0.9% of GDP deficit reported in the same period last year and the 2.4% of GDP targeted in the Medium-Term Fiscal Framework.
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PIPELINE: Corporate Bond Update: $3.5B EOG 4Pt Launched
- Date $MM Issuer (Priced *, Launch #)
- 06/16 $4B Hungary $1.5B +5Y +145, $1B +10Y +175, $1.5B +30Y +195
- 06/16 $3.5B #EOG $500M 3Y +50, $1.25B 7Y +80, $1.25B +10Y +90, $500M 30Y +100
- 06/16 $2.25B #Enbridge $400M 3Y +67, $600M 5Y +87, $900M 10Y +112, $350M tap 04/05/54 +122
- 06/16 $700M Unisys 5.5NC2.5 10.5%a
- 06/16 $500M #Atmos Energy 10Y +80
- 06/16 $500M #Kimco Realty +10Y +92
- 06/16 $Benchmark EIB 7Y SOFR+53a
- 06/16 $Benchmark America Movil +7Y +110a
- 06/16 $Benchmark IBK 3Y SOFR+58a, 5Y +45a
- 06/16 $Benchmark Islamic Development Bank Sukuk 5Y SOFR+58a
GBPUSD TECHS: Trend Needle Points North
- RES 4: 1.3800 Round number resistance
- RES 3: 1.3757 1.618 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 2: 1.3681 1.500 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 1: 1.3632 High Jun 13
- PRICE: 1.3601 @ 17:15 BST Jun 16
- SUP 1: 1.3456 Low Jun 10
- SUP 2: 1.3337 50-day EMA
- SUP 3: 1.3217 Trendline support drawn from the Jan 13 low
- SUP 4: 1.3140 Low May 12 and key support
The trend condition in GBPUSD remains bullish and price is trading closer to its recent highs. A rising price sequence of higher highs and higher lows, together with a bull set-up in moving average studies, highlights a dominant uptrend. Sights are on 1.3681 next, a Fibonacci projection. Resistance at 1.3616, the Jun 5 high has been pierced - a bullish development. Support to watch lies at 1.3456, the Jun 10 low.
US: FED Reverse Repo Operation
RRP usage retreats to $140.759B this afternoon from $168.645B Friday, total number of counterparties at 26. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
