EM LATAM CREDIT: IMF Spring Meetings Press Conference, El Salvador Positive Take
Republic of El Salvador (ELSALV; B3/B-/B-)
• The IMF’s view on El Salvador’s Bitcoin accumulation became clearer over the weekend with comments from the IMF Director for the Western Hemisphere Rodrigo Valdes at a press conference.
• As part of a USD1.4bn Extended Fund Facility (EFF) approved February 2025, the IMF stipulated that El Salvador stop accumulating bitcoin and ultimately divest its holdings. Meanwhile, the official El Salvador government Bitcoin portal has regularly been posting on X that El Salvador was buying another bitcoin for strategic reserve. Please see our March post for more information:
https://mni.marketnews.com/4iYjVeB
• IMF Director Valdes stressed that the El Salvador program was more about structural reforms, governance and transparency and not just about bitcoin. He said there has been a lot of progress on those objectives and progress on fiscal reform as well.
• Prior to being approved for the EFF program, El Salvador changed the law such that bitcoin was no longer legal tender, it didn’t have to be accepted for financial transactions, and it could not be used by the country to make payments. The IMF seems satisfied given progress on their main objectives.
• The IMF director was also asked about the effect on remittances in the region from the change in U.S. immigration policies and El Salvador was specifically mentioned as worth monitoring given the country’s strong reliance on remittances as a source of income.
• There was a USD113mn disbursement from the IMF in May. Additionally, there have recently been announcements of an additional USD900mn in loans coming from other multilateral banks including the Inter-American Development Bank (IDB), the World Bank, Central American Bank for Economic Integration (CABEI) and Corporacion Andina de Formento (CAF).
• ELSALV 2035 bonds were last quoted USD95.75, 2 ¼ points higher MTD but 1 ½ points lower YTD. They are almost equal in yield compared to much higher rated, recently issued Colombia (COLOM; Baa2neg /BB+neg /BB+neg) 2035 bonds.
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Historical bullets
USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
