EM LATAM CREDIT: Ecuador: IMF USD620mn Disbursement – Positive
(ECUA; Caa3/B-/B-)
• The IMF reached a staff level agreement where it agreed to disburse USD620mn (SDR438.4mn) subject to executive board approval as part of a USD5bn Extended Fund Facility (EFF). The IMF Staff concluded during its’ fourth review of the country’s policies, reforms, economic and fiscal progress that it met all of the quantitative performance criteria as well as made progress on monetary and fiscal policy initiatives.
• Ecuador bonds upward momentum persisted as development banks continued to approve billions of additional loans. ECUA 35s quoted at $85.84, or 9.64%, are 10 points higher since the last IMF approved disbursement of USD600mn two months ago. The failure of the government’s referendum to implement reforms caused a brief setback a few weeks ago but investor confidence remained undeterred. A bond rating upgrade from Fitch and loan approvals from the IDB and World Bank motivated further buying: https://mni.marketnews.com/4pfZNrO
• The most important remaining question is can the country access the international markets to refinance upcoming debt payments. At some point it could become self-fulfilling as a further decline in yield becomes a signal of lower perceived credit risk and higher investor confidence to roll over near term debt maturities.
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PIPELINE: Corporate Bonds Update: Alphabet 8Pt Jumbo Weighing
Rate lock hedged and speculative selling ahead unexpected Large (dual currency) debt issuance from Alphabet weighing on Tsys (TYZ5 slipped to 112-20 low, -1.5). Size of US$ issuance TBA. See ** for comps:
- Date $MM Issuer (Priced *, Launch #)
- 11/03 $Benchmark Alphabet 8-pt jumbo**: 3Y +60a, 3Y SOFR, +5Y +70a, 7Y +80a, 10Y +90a, 20Y +100a, 30Y +110a, 50Y +135a (massive debt issuance includes $6.5B over 6 tranches: 3Y, 6Y, 7Y, 13Y, 19Y and 39Y).
- 11/03 $Benchmark UBS 8NC7 +120a, 21.5NC20.5 +115a
- 11/03 $Benchmark Peoples Republic of China 3Y, 5Y
- 11/03 $Benchmark Qatar 3Y +45a, 10Y Sukuk +55a
- 11/03 $Benchmark Kingdom of Jordan 7Y investor calls
- **Piror Alphabet issuance for comparison: $5B on April 28 of this year ($750M 5Y +32, $1.25B 10Y +47, $1.5B 30Y +62, $1.5B 40Y +70) a long stretch since issuing $10B on Aug 3 2020 ($1B 5Y +25, $1B 7Y +45, $2.25B 10Y +58, $1.25B 20Y +73, $2.5B 30Y +88 and $2B 40Y +108)
SPAIN AUCTION PREVIEW: On offer this week
Tesoro el Publico will look to sell a combined E4.0-5.0bln of the following Oblis at its auction on Thursday:
- 3.00% Jan-33 Obli (ISIN: ES0000012P74)
- 1.85% Jul-35 Obli (ISIN: ES0000012E69)
- 3.50% Jan-41 Obli (ISIN: ES0000012O75)
Spain will also look to sell E250-750mln of the 1.15% Nov-36 Obli-Ei (ISIN: ES0000012O18) at that auction.
Additionally, Spain will look to sell a combined E4.5-5.5bln of the 6-month May 8, 2026 letras and the new 12-month Nov 6, 2026 letras at its auction tomorrow.
BONDS: Alphabet Issuance Announcement Adds Further Weight
An 8-part USD issuance announcement from Google’s parent Alphabet adds some pressure to U.S. paper.
- TY tests session lows, while Bund & gilt futures tick to fresh session lows,
- Bonds were already trading lower over the last couple of hours, with soft demand at the latest round of EU supply and early NY reaction to the uptick in equities touted as potential drivers in that window.
