EM LATAM CREDIT: Colombia: Tax Bill DOA, Economic Emergency? – Negative
(COLOM; Baa3/BBneg/BB+neg)
• The COP16.3Tn tax bill failed to pass the Senate as most anticipated: https://mni.marketnews.com/44lfTrW
• COLOM 35s widened nearly 25bp since Friday. The government seemed adamant about not cutting spending to fill the budget gap so how will they respond?
• Finance Minister Avila used the words “economic emergency” to describe the failure of the tax bill which may mean they plan to invoke emergency powers to decree a hike in taxes. That action would require the signatures of Petro’s cabinet, congressional review and constitutional court review, according to national newspaper El Espectador, of which we think the latter two would not likely agree that this was a true emergency.
• Based on President Petro’s comments it seems the most likely scenario is a cut to investment plans such as 4G highways and the Bogota metro.
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FOREX: Cross/JPY Advance Moderates with Equities Off Highs
- Price action across the late European and US session has been subdued for G10 FX, with the USD index firming a touch and the Japanese yen edging off its worst levels. Cross/JPY price action has been assisted by the major US equity benchmarks paring their post-cash open gains, emphasising the yen’s ongoing sensitivity to equity sentiment.
- In the background, newly appointed PM Takaichi has already signalled a shift toward more expansionary fiscal policy and said last week that Japan remains only halfway toward achieving stable inflation supported by wage growth. That may be an indication she would like the Bank of Japan to stay cautious as it gradually raises interest rates.
- In a recent MNI policy exclusive, a former board member Makoto Sakurai told MNI the BOJ should raise its policy rate 25bp to 0.75% at the Dec 18-19 meeting, as delaying a move would undermine its independence and risk further yen depreciation amid pressure from U.S. funds.
- While it may need some bravery, USDJPY has once met some resistance above the 154.00 handle, registering a seventh daily high between 154.14-154.48, bolstering the short-term significance of this resistance cluster. First important support to watch lies at 152.68, the 20-day EMA.
- Japan’s economic calendar is quiet this week, with the focus on the upcoming preliminary read of Q3 GDP, scheduled on Nov 17 local time. Governor Kazuo Ueda’s speech to business leaders in Nagoya City on December 01 could be a crucial event ahead of the December BOJ decision.
FED: US TSY 13W BILL AUCTION: HIGH 3.780%(ALLOT 86.83%)
- US TSY 13W BILL AUCTION: HIGH 3.780%(ALLOT 86.83%)
- US TSY 13W BILL AUCTION: DEALERS TAKE 35.20% OF COMPETITIVES
- US TSY 13W BILL AUCTION: DIRECTS TAKE 5.95% OF COMPETITIVES
- US TSY 13W BILL AUCTION: INDIRECTS TAKE 58.85% OF COMPETITIVES
- US TSY 13W BILL AUCTION: BID/CVR 2.83
FED: US TSY 26W BILL AUCTION: HIGH 3.690%(ALLOT 12.95%)
- US TSY 26W BILL AUCTION: HIGH 3.690%(ALLOT 12.95%)
- US TSY 26W BILL AUCTION: DEALERS TAKE 32.03% OF COMPETITIVES
- US TSY 26W BILL AUCTION: DIRECTS TAKE 8.74% OF COMPETITIVES
- US TSY 26W BILL AUCTION: INDIRECTS TAKE 59.24% OF COMPETITIVES
- US TSY 26W BILL AUCTION: BID/CVR 2.95
