EM LATAM CREDIT: Ecuador’s Economy in Recession, Impact on Elections
Ecuador (ECUA;Caa3/B-/CCC+)
- Post Noboa’s election in October 2023, ECUA 2030 bonds have moved from $51 to nearly $75, approaching the peak back in Sept. 2024. While Noboa has made some attempts at improving security and a hike in the VAT earlier this year added revenue to government coffers, electricity blackouts and lack of foreign direct investment as well as limited liquidity leave the country vulnerable as the 2030 bonds start to amortize next year. The IMF estimated a .6% impact to GDP from the electricity blackouts in 2024. Moody’s cited in a December periodic review, “Despite a new IMF program in 2024, a funding gap in 2025-26 persists that will likely lead to a credit event.”
- “Ecuador’s GDP fell 1.54% y/y in 3Q. World Bank estimates GDP will drop .7% in 2024 while the IMF sees a contraction of .4% for the year”, according to El Universal, with weakness showing in a majority of the economy including petroleum, construction and mining.
Noboa appeared to have won the Presidential debate this past Sunday and polls give him a small edge vs Luisa Rodriguez, protégé of former President Correa who declared Ecuador’s debt “illegitimate” back in 2009 when the country defaulted. 2030 bonds leaped more than a point post-debate. Economic trends and impact on social discontent could be an important factor going forward.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS/SUPPLY: Review 2Y Note Auction: On the Screws
- Tsy futures holding near recent session lows after the $69B 2Y note auction (91282CME8) came out on the screws: 4.335% high yield vs. 4.335% WI; 2.73x bid-to-cover vs. 2.77x prior.
- Indirect take-up climbed to 82.09% from 71.63% prior, directs slips to 6.65% vs. 19.17% prior, primary dealer take-up 11.26% vs. 9.20% prior.
- The next 2Y auction is tentatively scheduled for January 27.
FED: US TSY 2Y NOTE AUCTION: HIGH YLD 4.335%; ALLOTMENT 21.89%
- US TSY 2Y NOTE AUCTION: HIGH YLD 4.335%; ALLOTMENT 21.89%
- US TSY 2Y NOTE AUCTION: DEALERS TAKE 11.26% OF COMPETITIVES
- US TSY 2Y NOTE AUCTION: DIRECTS TAKE 6.65% OF COMPETITIVES
- US TSY 2Y NOTE AUCTION: INDIRECTS TAKE 82.09% OF COMPETITIVES
- US TSY 2Y AUCTION: BID/CVR 2.73
EURUSD TECHS: Bear Threat Remains Present
- RES 4: 1.0937 High Nov 5 / 6 and a key resistance
- RES 3: 1.0825 High Nov 7
- RES 2: 1.0630 High Dec 06
- RES 1: 1.0501/0629 20- and 50-day EMA values
- PRICE: 1.0398 @ 16:31 GMT Dec 23
- SUP 1: 1.0343 Low Dec 20
- SUP 2: 1.0335 Low Nov 22 and the bear trigger
- SUP 3: 1.0311 1.382 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 4: 1.0258 1.500 proj of the Sep 25 - Oct 23 - Nov 5 price swing
EURUSD has recovered off its recent lows, however, a bearish threat remains present. The move down last week paves the way for a test of key support at 1.0335, the Nov 22 low and a bear trigger. Clearance of this level would confirm a resumption of downtrend and open 1.0311, a Fibonacci projection. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. Initial firm resistance is at 1.0501, the 20-day EMA.
