COLOMBIA: Colombia Suspends Fiscal Rule - Negative
(COLOM; Baa2neg/BB+neg/BB+neg)
"*AVILA: COLOMBIA UNLIKELY TO STAY WITHIN FISCAL RULE LIMITS
*AVILA: THERE WILL BE 'NECESSARY' INCREASES IN DEBT LEVELS
*AVILA: MEETING COLOMBIA FISCAL RULE WOULD BRING PARALYSIS
*AVILA: COLOMBIA FISCAL COMMITTEE TO TAKE KEY DECISIONS ON MON.
*AVILA: COLOMBIA MUST LOWER FISCAL DEF. OVER `REASONABLE' PERIOD" - BBG
This is what people feared but not necessarily what they expected. With a 6.8% fiscal deficit last year and by some estimates a fiscal deficit over 7% this year it would take some creative accounting to declare compliance with the fiscal rule.
The government has shown a reluctance to cut spending and an inability to pass tax reform. Interest rates on both hard currency and local currency debt remain high so interest costs continue to mount.
This appraisal by Finance Minister German Avila seems to be a fair assessment of the situation given the lack of political will to fix it.
The intention to not abide by the fiscal rule should result in across the board downgrades from the rating agencies and probably some corporate debt that is capped at or tied to the sovereign ceiling.
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ASIA: Government Bond Issuance Today
- Bank of Thailand to Sell THB35 bn of 363-Days FRNs
ASIA: Coming Up in Asia Today
| 1600GMT | 0500HKT | 0700AEDT | South Korea Foreign Reserves APR |
| 2100GMT | 1000HKT | 1200AEDT | Philippines GDP YoY 1Q |
| 2100GMT | 1000HKT | 1200AEDT | Philippines GDP SA QoQ APR |
| 2200GMT | 1100HKT | 1300AEDT | Indonesia Foreign Reserves APR |
| 2300GMT | 1200HKT | 1400AEDT | Malaysia Industrial Production YoY MAR |
| 0200GMT | 1200HKT | 1400AEDT | Malaysia Manufacturing Sales Value YoY MAR |
| 2200GMT | 1500HKT | 1700AEDT | Malaysia BNM Overnight Policy Rate |
| 0000GMT | 1500HKT | 1700AEDT | Malaysia Foreign Reserves APR |
| 0330GMT | 1600HKT | 1800AEDT | Taiwan Imports YoY APR |
| 0330GMT | 1600HKT | 1800AEDT | Taiwan Exports YoY APR |
| 0330GMT | 1600HKT | 1800AEDT | Taiwan Trade Balance APR |
| 0800GMT | 1630HKT | 1830AEDT | Hong Kong Foreign Reserves APR |
NZD: NZDUSD - Fails Above 0.6000 Again
The NZD had a range overnight of 0.5935 - 0.6013, Asia is opening around 0.5940. US Stocks ended in the green after a very whippy session and the USD has finally seen some buyers return after the FOMC.
- MNI on Labour data - While the unemployment rate was stable at 5.1%, better than the consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus, the data is close enough to what the RBNZ expected in February, and another 25bp rate cut on May 28 remains likely.
- Bloomberg - “Labor market data for the first quarter confirmed that domestic economic activity remains subdued, Governor Christian Hawkesby told a parliament select committee Thursday in Wellington.”
- “He said there were a lot of “soft” numbers underneath the headline”
- “Greater uncertainty from trade war is hurting confidence and making businesses less likely to invest “We think that’s probably the most immediate channel and possibly one that’s contributing towards a more subdued domestic economic environment, in conjunction with the hangover from high interest rates”
- The NZD could not hold above 0.6000 once again which suggests a potential retracement, which could offer better levels to buy.
- The price action continues to suggest that dips will probably still find demand, first support on the day is 0.5900 then 0.5800/50.
- CFTC data show Asset managers reduced their NZD shorts once more while Leveraged funds actually added a little to their current short.
- Data/Event : NZ Bond Sale
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
