EM LATAM CREDIT: Colombia Petro Investigation - Positive

• So that's what led me in May to say. Okay, now I've got the clarity. In addition, more wage settlement data has been coming in. I think we're going to end up with over 1000 observations, but we've got like 200 now, and it's coming in right on the agents number of 3.7 in the in the sample of 200 so at the main meeting, I felt okay. Now I have the clarity that I was lacking in March. And this shock, this new shock about the global environment, is so severe that you know we need to act. I think there's more probability for me on the downside scenario because of the domestic dynamics and what I think of it as the essentially disinflationary force of that external shock.
• So I think it's dis inflationary for two reasons, global uncertainty, which will, just for me, amplify the wait and see and precautionary dynamics for households and businesses everywhere, not just here, but also, importantly, the trade diversion mechanism from the US. Here, China and EU are the main issue. Where are those exports going to land and that'll put downward pressure, I think, on us and on our import prices. 

Ed Balls: What are you seeing in the data and why does that leave you in a different place to seven of the nine MPC members? 

• Taylor: Coming on to the committee in 2024, we saw negative demand bars [from Bayesian structural var work shown earlier in the conference] that suggested disinflation was underway. I felt that was sufficiently advanced in December to dissent.
• Then we're into the kind of fog of January, February, March. We had one-off things piling up: VAT, bus fares, OFGEM, the scarcity of gas… You'd say, okay, if I had one of those, or two of those, I'd look through them. But it was like six of those. And instead of adding up to point one here, point two there, it was like 1.0 and so you've got to pause for pause for thought.
• We weren't clear on what employers national insurance increases would do and we had a lot of issues with the data quality […] The agents pay survey said 3.7 for the coming year and we're trying to be forward looking, so I'm looking at that and thinking is it going to come in at 3.7, and we didn't have any readings at that point. So yeah, the sleepless night was in March, because I'm kind of driving blind, and also, I know there's possibly a trade policy shock coming in early April. So then I decided, okay, that this is the time to just take pause.
• As we got into April and May, I think it's become clearer. We've had energy news. The gas prices fully reversed now back down to 70. Oil is down to near 60. There are, you know, talk in Texas of closing wells because we're near the break even point. You know that's good news for bad news reasons. The erosion of confidence that we saw has continued. We're getting very low readings on PMI and Rec and so forth. So there's that continuation, the sort of wait, wait and see, in the kind of precautionary saving, postponement of investment in terms of households and businesses, there's that sense of continued precaution and concern, and then then the last thing was the tariff shock, which I think came through bigger than anyone expected. 

• Date $MM Issuer (Priced *, Launch #)
• 05/12 $1.1B #Southern California Gas $600M 10Y +105, $500M 30Y +120
• 05/12 $1B Carnival Cruise Line 6NC 5.875%a
• 05/12 $1B #ENI 10Y +140
• 05/12 $800M #Pinnacle West Capital $400M 3Y +93, $400M 5Y +108
• 05/12 $750M #Ally Financial 4NC3 +175
• 05/12 $725M #Commonwealth Edison 30Y +105
• 05/12 $500M #EIDP WNG 7Y +92
• 05/12 $500M Crown Americas 8NC3 6$
• 05/12 $500M #Blue Owl Capital WNG 5Y +235
• 5/12 $Benchmark Caterpillar 10Y +78, 30Y +80
• 05/12 $Benchmark UPS +5Y +55, 10Y +82, 30Y +107, 40Y +117
• 05/12 $Benchmark US Bank 3NC2 +73, 3NC2 SOFR, 6NC5 +98
• 05/12 $Benchmark Toyota Motor Cr 2Y +53, 2Y SOFR+71, 5Y +73
• 05/12 $Benchmark Woodside Finance TBA
• 05/12 $Benchmark Lennar 5Y +110
• 05/12 $Benchmark L'Oreal 10Y investor calls