EM LATAM CREDIT: Ecopetrol (ECOPET; Ba1 /BB+neg /BB+neg): Shell Sells Stake
“Shell to Sell Stake in Blocks Shared with Ecopetrol: El Tiempo” – BBG / El Tiempo
Neutral for spreads
• Shell is selling its 50% stake in Colombia offshore gas fields as the magnitude of the discovery was deemed insufficient to justify the multi-million-dollar investment, according to El Tiempo, which would involved deep water pipelines and onshore facilities.
• At one point it was thought this natural gas discovery in the deep-water region off the coast of Colombia was the largest since 1989, according to El Tiempo quoting Colombia ex-president Juan Manuel Santos from 2017.
• Shell bought the stake from American oil company Occidental Petroleum in 2020. ExxonMobil, Chevron and ConocoPhillips are other multi-nationals who have decreased their investments in the region in the past five years.
• Colombia is a net importer of natural gas with domestic demand exceeding supply given government limitations on exploration.
• 7-year notes issued October 2024 at a spread of T+388bps were last quoted T+467bps, 64 bps wider MTD. Spread to the sovereign was +101bps and has ranged from 68bps to 107 bps since the October issuance.
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US: MNI POLITICAL RISK - Trump Signals Narrower April 2 Tariffs
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- Markets rallied yesterday after Trump signalled his April 2 reciprocal tariffs may be narrower than anticipated.
- Trump touted a USD$20 billion investment from Hyundai as a "clear demonstration" that tariffs work.
- Trump threatened secondary tariffs on any country that buys Venezuelan O&G.
- The Trump administration is dealing with a major scandal after a journalist was inadvertently included in a Signal chat group that discussed sensitive military operations. The chat included comments likely to rile European allies and opens the door for a Democrat messaging offensive.
- EU trade chief Maros Sefcovic is in Washington today to discuss tariffs with Commerce Secretary Howard Lutnick and USTR Jamieson Greer. An Indian team is also in Washington seeking tariff exemptions.
- The “Big Six” Republican leaders will hold a meeting with White House officials today to discuss Trump’s legislative agenda.
- Senator John Kennedy (R-MS) said Trump is “very interested” in having Congress codify DOGE cuts.
- Trump is cutting around $3 billion from Fiscal Responsibility Act side deals.
- A Florida special election on April 1st will provide hard data on the mood in the electorate.
- US and Russian teams in Riyadh failed to agree on a joint statement after 12 hours of talks yesterday.
- Defense Secretary Pete Hegseth will depart this week on an Indo-Pacific tour
- Poll of the Day: Just 20% of US voters say tariffs should be a priority for Trump.
Full article: US DAILY BRIEF
US DATA: Increasingly Pronounced Stagflation Signals In Philly Fed Services
The Philadelphia Fed's Nonmanufacturing Business Outlook Survey showed a continued deterioration in regional services activity after a brief period of exuberance, mirroring the drop in the neighboring Empire State (NY Fed) survey. The regional general activity index dropped 24 points to -32.5, marking the lowest level since the start of the Covid pandemic. New orders fell to a 23-month low (-19.5) and the 6-month outlook for activity fell to a post-2020 low (-24.0).
- Per the Philadelphia Fed, "The indexes for general activity, new orders, and sales/revenues remained negative, with the former two declining further. On balance, the firms reported a decrease in full-time employment. Both price indexes rose and indicate overall increases in prices. The respondents expect declines in growth overall over the next six months both for their firms and in the region."
- This survey only has data back to 2011 but the currently depressed level of business activity has only been matched in periods of extreme weather (2011) and the Covid pandemic (2020).
- This is a very different story than being told by the flash March S&P PMI which rose to a 3-month high 54.3 in March, so the state of the services sector amid broader government policy uncertainty and possible deterioration in domestic demand remains obscured.
- One clearly consistent theme across these surveys though is inflation: prices paid rose to a 16-month high (36.0), with prices received up to just a 3-month high (8.4), potentially suggesting margin pressures at services firms (the March flash PMI noted an 18-month high in service sector prices paid).
- With manufacturing surveys including the Philly Fed's showing similar price pressures, it is hard not to get a sense of ongoing "stagflation" in the economy, in the soft/survey data at least so far.
EQUITIES: US Cash Opening Calls
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