EM LATAM CREDIT: Colombia: Presidential Election – Negative
(COLOM; Baa3/BBneg/BB+neg)
• The big driver of spreads going forward will be politics as the presidential election is about six months away and the markets would like to see a change in government. A viable center or right-wing candidate would be positive while an increase in popularity of Ivan Cepeda representing President Petro’s Historic Pact party would be negative.
• Already this issue contributed to a 52 bp widening in spreads since poll results reported November 18th showed Cepeda leading voting intentions with 21% followed by conservative Abelardo de la Espriella with 14% and centrist Sergio Fajardo at 8%. Increasing uncertainty are new stringent guidelines which will limit polling firms to those who meet the standards.
• A more recent poll of 2,080 people in 148 municipalities conducted by Invamer showed Cepeda with 31.9% compared to Aspriella at 18.2% and Sergio Fajardo with 8.5%. 30 candidates were included in the poll but most failed to reach at least 3% of voting intention. Some of the more prominent candidates were Miguel Uribe who got 4.2%, former Bogota mayor Claudia Lopez with 4.1% and Vicky Davila at 3.7%.
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EURUSD TECHS: Monitoring Resistance
- RES 4: 1.1728 High Oct 17
- RES 3: 1.1669 High Oct 28 and key resistance
- RES 2: 1.1627 50-day EMA
- RES 1: 1.1587/91 20-day EMA / High Nov 7
- PRICE: 1.1547 @ 15:59 GMT Nov 10
- SUP 1: 1.1469 Low Nov 5 and the bear trigger
- SUP 2: 1.1425 1.500 proj of the Oct 17 - 22 - 28 price swing
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
EURUSD has recovered from its recent lows. The move higher, for now, appears corrective. A short-term recovery is allowing a recent oversold condition to unwind. A late sell-off into the Monday close helped back up this view. Resistance to watch remains the 20-day EMA, at 1.1587. It has been pierced, a clear break of it would signal scope for an extension towards the 50-day EMA, at 1.1627. The trend remains bearish. A reversal would refocus attention on the bear trigger at 1.1469, the Nov 5 low.
OPTIONS: Sonia Upside-Leaning Makes For Active Start To Week
Monday's Europe rates/bond options flow included:
- ERM6 98.75/98.875 call spread paper paid 0.25 on +5K
- SFIZ5 96.20/96.10 put spread vs. 0NZ5 96.50/96.40 put spread, paper paid 0.25 on 4.5K (+SFIZ5, -0NZ5)
- SFIH6 96.60/96.65/96.70 call fly paper paid 0.5 on 3K
- SFIH6 96.25/35/65/75 call condor paper paid 5.75 on 5K
- SFIH6 96.45/96.75 call spread vs. 96.30 puts paper paid 1.5 on 3.3
- SFIJ6 96.70/80 call spread vs. 96.25/15 put spread paper paid 1.5 on 7.5K for the call spread
- 0NZ5 96.70/96.90 call spread (vs 62+) 22K given at 3.75
US TSYS/SUPPLY: WI 3Y
- WI rises slightly ahead of the $58B 3Y note auction (91282CPK1) cut-off at 1300ET.
- 3Y WI is currently at 3.592%, 1.6bp cheap to last month's stop: drawing 3.576% high yield vs. 3.584% WI.
