EM LATAM CREDIT: Colombia: Moody's Rating Changes Financial Institutions-Neutral
(BCOLO; Baa2neg/BB+neg/BB+neg)
(AVALCB; Ba2/NR/BB+)
(BANBOG; Baa3/BB+neg/BB+neg)
(DAVIVI; NR/BB+neg/BB+neg)
(BANGAN; Baa3/NR/BBB-neg)
"Moody's Ratings takes actions on Colombian financial institutions following sovereign downgrade" - Bbg
Baseline credit assessments remain unchanged and perception of government support is that there is no change in willingness but a reduced ability to support these top financial institutions should it become necessary.
Bancolombia long-term deposit ratings were downgraded along with the counterparty risk assessment but no change to outstanding Tier 2 bond ratings, though the outlook remained negative.
Holding company Grupo Aval's ratings outlook was revised to stable from negative in line with the sovereign outlook and the senior bond rating was affirmed at Ba2.
Banco de Bogota senior ratings were downgraded to Baa3 consistent with the sovereign and the outlook was changed to stable from negative.
Banco Davivienda's bond ratings remain unchanged but the outlook is negative as the rating agency has concerns about the integration with its recent integration of Bank of Nova Scotia Colombia operations as well as lingering concerns about problem loan levels that though improved remain elevated.
BBVA Colombia doesn't currently have hard currency bonds outstanding. The long-term local and foreign currency deposit ratings were affirmed at Baa3 which incorporates expectations of some support from parent BBVA of Spain and an assumption of likely support from the Colombia government if needed.
DAVIVI just issued Tier 2 subordinated notes that were last quoted 7.95% after getting priced at 8.1% yesterday, up 1/2 point in price. The Tier 1 DAVIVI perps were unchanged in price.
BCOLO 34s Tier 2 sub debt were quoted USD105.32, down .33 which was in line with the sovereign.
BANBOG 27s senior debt was quoted unchanged at USD98.30.
AVALCB 30s senior debt was quoted unchanged at USD91.46.
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US: Trump's Approval On Economy/Trade/Inflation Strengthens
US President Donald Trump has seen his net approval rating on trade, the economy, and inflation all improve from lows seen in late-April, in reaction to a decrease in uncertainty surrounding Trump's trade policy.
- Silver Bulletin notes that Trump's approval rating on trade and the economy currently sits at roughly net-10%, with his approval on inflation substantially lower at -19.7%.
- The polling suggests that voters have upgraded their assessment of Trump's handling of key economic issues following a series of talks to dial down tensions with trading partners, particularly China.
- The positive reaction to Trump's tariff rapprochement may signal a more moderate trade policy as deadlines for the conclusion of tariff pauses on China and the EU approach.
Figure 1: Trump's Net Approval on Issues
Source: Silver Bulletin
US TSYS/OVERNIGHT REPO: RRP Takeup Jumps, Further Rises Expected To Be Limited
Takeup of the Fed's overnight reverse repo facility jumped Wednesday, rising $35.6B to $173.6B, the second-highest total of the month ($180.4B May 19).
- ON RRP takeup has been somewhat erratic the last few sessions, though it's not expected to rise much past Wednesday's levels (ie remaining below $200B).
- One exception of course could be at the end of this week, given the typical temporary rise amid month-end dynamics.
FED: Analysts Eye Reiteration Of Patient Rate Approach In May Minutes (2/2)
Selected sell-side analysts on the May meeting minutes:
- BMO FICC: "it will be the first Minutes to incorporate two key macro events: 1) The ‘Liberation Day’ tariff announcements, and 2) Q1’s negative real-GDP print. If anything, we'll be curious to see if there are any nuances to the Fed's game plan for a situation in which its dual-mandate goals are in tension."
- BofA: "The minutes should underscore the stagflation risks that were emphasized in the statement, and the notion that the Fed is frozen in place until there is greater clarity on policy. Any details on how the Fed would respond to stagflation, if it were to materialize, would be of interest to markets. But we doubt the Fed would want to lose optionality by being explicit on its reaction function at this stage."
- Deutsche: "With most Fed officials seemingly aligned with this messaging [wait-and-see approach to policy] before and after the meeting, the minutes are likely to signal broader consensus on the Committee for Powell’s signals. The minutes are also somewhat stale as the meeting occurred before the most recent significant trade de-escalation with China."
- Natixis: "We will be watching out for any assumptions about the final outlook for trade policy but don’t expect much new to be revealed."
- TD: "We expect them to reiterate that economic uncertainty remains a key factor for the US outlook, leading to policy guidance that has remained cautious."
