EM CEEMEA CREDIT: Kuwait (KUWIB): S&P Upgrade, Supportive
Nov-24 09:48
(KUWIB; A+/AA-/AA-)
- State of Kuwait’s sovereign ratings were upgraded to AA- by S&P aft-mkt hours last Friday. We read this as supportive for credit sentiment in the context of on-going strong investor demand for risk exposure to the broader GCC region and, importantly, expect more $ issuance in the near future. In secondary markets, our screen feeds show KUWIB Oct35s charting just sub 100bp area in z-spd terms, some 5bp tighter vs previous CoB (source: Bloomberg).
- In its rationale, the agency cites key fiscal and economic reforms as well as a new framework for state financing, paving the way for an improvement in the overall credit assessment, which we think comes late in the process.
- Financing of the projected high fiscal deficits (headline projected avg at 7% of GDP over ’25-’28 period on oil prices revised lower to $60/bbl on ’26 and $65/bbl in ’27-’28) and raising debt/GDP (gross govt debt seen at 24% of GDP by ’28 from 13% projected at YE ‘25) is seen as adequate in the context of a strong capital position from the General Reserve Fund (GRF) managed through the SW fund Kuwait Investment Authority (KIA, whose liquid assets are projected at 534% of GDP in over the same period).
- Of note in this respect, the medium-term financing plan is described as “supportive of expanding non-oil revenue sources”. Not a surprise, in essence this is seen as a boost to the economy with GDP growth expected at +2% area following recent contraction. There is plenty of scope for more debt issuance since the financing and liquidity law in place since the end of March allows for KWD30bn debt ceiling, approx. seen as 63% of GDP equivalent. For context, oil-revenues remain central as they are reported as accounting for 90% of exports and govt rev’s.
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FED: MNI Fed Preview - October 2025: QT, Or Not QT
Oct-24 21:06
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Oct-24 20:55
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
Oct-24 20:00
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
