EM LATAM CREDIT: El Salvador: IMF Staff Level Disbursement: Positive take
Republic of El Salvador (ELSALV; B3 /B- /B-)
"IMF Reaches Staff-Level Agreement on the First Review under El Salvador’s Extended Fund Facility Arrangement" - IMF
• In the first review of the 40-month Extended Fund Facility (EFF), the IMF staff recommended USD120mn be disbursed to El Salvador. Overall, the IMF was pleased with the country meeting fiscal and reserve targets as well as progress with governance, transparency and financial resilience reforms.
• The past few months controversy surrounded the country's continued accumulation of Bitcoin and how the IMF would react given some explicit objections to that activity in the IMF agreement.
• In this latest review the IMF said, "efforts will continue" to limit the country's overall position in Bitcoin to unchanged across accounts and to terminate its involvement in the public digital wallet program "Chivo".
• In the bigger picture, the IMF is focused on reforming and strengthening the country with Bitcoin being only one piece of the puzzle, as they alluded to in remarks a few months ago. It also helps that the U.S. Administration seems supportive of President Bukele and regards the country as an ally in Latin America, as Robert F Kennedy Jr said recently at Ecuador President Noboa's inauguration.
• Please see our post which discusses the IMF viewpoint on Bitcoin for more information:
https://mni.marketnews.com/4jol66W
• ELSALV 2035s were last quoted T+392bps, 56 bps tighter QTD and 77bps wider YTD.
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US: GOP Leaders Faces Toughest Test Yet As Reconcilliation Markup Begins
Republican-led House committees will tomorrow begin marking up the massive reconciliation package that GOP leadership hopes to pass in a party-line vote before Memorial Day. The package covers the bulk of President Donald Trump’s tax, border security, and energy agenda and is likely to include a roughly four trillion-dollar hike to the federal debt limit.
- For the first time, House Republicans will ink out the specifics of huge cuts to government services they outlined in broad strokes in their budget blueprint. The cuts, including USD$880 billion from the Department of Commerce, are likely to include major reforms to safety net programmes like Medicaid.
- So far, House Republican leadership has defied expectations, forcing a series of votes through a razor-thin majority despite warnings from conservatives over deficit spending in the reconciliation bill.
- This month’s mark-ups will be a more difficult lift for leadership. House Republican cuts are likely to go beyond what is palatable for House moderates and Senate Republicans and come as Trump’s sinking approval rating flashes warning signs for frontline Republicans.
- The Treasury Department is expected to send Congress its formal projection for the so-called X-date this week. As the reconciliation package includes a debt limit hike, the X-date will provide a hard backstop for getting the package through Congress.
- House Speaker Mike Johnson (R-LA) will meet Trump at the White House at 14:00 ET 19:00 BST to discuss reconciliation. The pair may discuss the prospect of a millionaire tax as a revenue source.
BONDS: Futures remain under pressure
- The small breakout of the 131.11 initial support noted in Bund for today has provided a round of selling in US Treasuries.
Ukraine's proposal of a ceasefire isn't really new, the country has always been willing to agree on a ceasefire. - The German contract is lacking momentum, and a clear break through the figure is needed to make an attempt at the next support of 130.75.
- For the US 10yr Yield, it has edged near 4.30%, but not really a Technical level.
- The initial area of interest is seen much further out, up to 4.4341%, this would equate to 110.07+ Today.
