EM LATAM CREDIT: Panama: Moody’s Baa3 Affirmed – Positive
Nov-13 19:11
(PANAMA; Baa3neg/BBB-/BB+)
- While the rating remained on negative outlook, the near-term threat of a downgrade diminished. The fiscal deficit was expected to improve from 7.4% of GDP in 2024 to a Moody’s projection of 4-4.5% in 2025 after spending cuts were implemented and pension reform was enacted, allaying concerns about mounting costs in the next few years. The threat of litigation from the closing of the copper mine was also reduced.
- The rating affirmation did not have an impact on the market as it has got comfortable with the idea of enough progress having been made to avert a downgrade in the near term. PANAMA 35s were last quoted T+167bp, 86bp tighter since June 30th and 147bp tighter YTD.
- Only two months ago, a senior VP at Moody’s warned that the rating was on the verge of getting downgraded, according to Newsroom Panama. We see a reference in the Moody’s press release of forthcoming legislation that will be presented early next year to further address fiscal imbalances so maybe that convinced the rating agency to give the country more time to improve its finances.
- Underlying structural rigidities remain, according to the rating agency. They cite mandated education spending at 7% of GDP as well as legally dictated salary increases, inefficient allocation of subsidies and poor tax collection with widespread tax evasion. The ruling party lacks a majority in the National Assembly so making progress on further fiscal reforms is challenging.
- Offsetting that is expected healthy economic growth of 3-4% annually for the next five years. Debt/GDP is expected to creep higher over the next few years to 65% in 2025 from 62% in 2024 according to the rating agency.
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EURJPY TECHS: Trading Above Support
Oct-14 19:00
- RES 4: 180.00 Psychological round number
- RES 3: 179.91 Top of a bull channel drawn from the Feb 28 low
- RES 2: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 1: 177.94 High Oct 10 and the bull trigger
- PRICE: 176.18 @ 17:10 BST Oct 14
- SUP 1: 175.67 Low Oct 10
- SUP 2: 174.87 20-day EMA
- SUP 3: 173.24 High Oct 3 and a gap low on the daily chart
- SUP 4: 172.27 Low Oct 2 and a key medium-term support
The trend set-up in EURJPY is bullish and the latest pullback appears corrective. First key support to watch lies at 174.87, the 20-day EMA. A breach of this EMA would signal scope for a deeper retracement. On the upside, the cross has cleared resistance at 175.13, the Sep 29 high, to confirm a resumption of the primary uptrend. A reversal higher would open 178.94, a Fibonacci projection.
US TSYS: Late SOFR/Treasury Option Roundup: Heavy Volumes
Oct-14 18:56
Heavy SOFR and Treasury option volumes Tuesday, flow mixed & varied - SOFR leaning towards upside call structures. Underlying futures are firmer, off early highs (Sep 17 lvls - prior to FOMC rate cut). Projected rate cut pricing largely steady vs. late Monday levels (*): Oct'25 at -24.2bp (-24.7bp), Dec'25 at -48.4bp (-48.1bp), Jan'26 at -61.2bp (-61bp), Mar'26 at -74.1bp (-73.5bp).
- SOFR Options:
- Block, 10,000 SFRZ5 96.50/96.62 call spds, 1.5 net
- Block, 25,000 0QZ5 98.00 call spds, 1.25 net ref 97.035
- -10,000 SFRX5 96.37 straddles 10-8 ref 96.37
- Block/screen +90,000 0QZ5 98.00 calls, 1.0 ref 97.035
- +20,000 SFRZ5 96.50/96.62 call spds, 1.5
- +4,000 SFRZ5 96.18/96.31/96.43 2x3x1 put flys, 0.5
- +4,000 SFRX5 96.25/96.31/96.43/96.50 put flys, 4.25
- -2,000 SFRX5 96.37 straddles 10-9.5
- 2,100 SFRZ6 96.62/97.00 2x1 put spds
- over 8,300 SFRZ5 96.06/96.18 2x1 put spds ref 96.375
- over 20,000 SFRZ5 96.37/96.50/96.56 broken call flys, 2.75 ref 96.38
- 2,500 SFRZ5 96.12/96.37/96.62 call flys ref 96.375
- Block, +2,500 0QZ5 96.75/96.87 put spds, 3.5 ref 97.035
- Block, -3,000 SFRZ5 96.25/96.37 put spds, 3.75 ref 96.375
- +16,000 SFRF6 96.68/96.87/97.06 call flys, 2.5 ref 96.385/0.05%
- -2,000 0QZ5 96.68/96.81 2x1 put spds 0.5 vs. 97.025/0.05%
- +2,000 SFRZ5 96.06/96.12/96.18/96.25 put condors, 1.0 vs. 96.405/0.06%
- +4,000 0QZ5 96.12/96.50 put spds, 1.0 ref 97.015/0.05%
- +2,200 0QH6 97.12 calls, 21.5 ref 97.075
- over 5,700 SFRF6 96.87 calls ref 96.62
- +4,000 SFRZ5 96.50/96.56 call spds, 1.0 ref 96.38
- 7,500 SFRZ5 96.62/97.00 2x1 put spds, 0.5 ref 97.075
- 1,500 0QZ5 97.12/97.25/97.37/97.50 call condors ref 97.075
- +17,000 SFRU6 96.56/96.81 2x1 put spds, 1-2 ref 96.97 to 97.005
- +3,500 SFRM6 97.00 calls, 18.5 vs. 96.84/0.40%
- Treasury Options:
- Block: 10,000 TYZ5 115 calls 16 vs. 13,000 TYG6 115.5 calls 31, vs. 1,000 TYZ 113-07.5
- over 2,700 USX5/USZ5 114 put spds, 19 ref 118-05
- Block, 7,000 TUZ5 103.87/104.12/104.25/104.37 broken put condors, 0.5 net
- 10,000 TYZ5 114.5 calls, 22 ref 113-08
- -8,000 TYZ5 113.5/114.5 call spds, 8
- -5,000 TYF5 113.5 straddles, 210
- 1,000 USX5 115/117 put spds, 15 ref 118-20
- 1,500 TYX5 112.75 puts, 9
- 1,000 TYZ5 111.5/113 put spds
- -4,000 FVZ5 109.5 puts, 23 ref 109-25.5
- 3,000 TYX5 114/115 call spds over 111.5 puts ref 113-13
- 2,500 TUZ5 105 calls, 3.5 ref 104-13.75
- -3,000 TYZ5 115 calls, 19
- +2,500 TUX5 104.25 straddles, 16
- +3,000 TYX5 111.5/114 strangles, 14
- +2,000 FVX5 109.25/109.5 strangles, 31.5
- -2,000 FVX5 109.25/109.75/110/110.75 broken call condors, 11.5
- +2,500 TUZ5 105 calls, 3.5 ref 104-13.75
- 6,000 TYX5 114.5 calls, 5 ref 113-11
- +3,000 TYZ5 114 calls, 37 vs. 113-14/0.41%
- +10,000 TYZ5 114.5 calls 6 over 111.5/112.5 put spd ref 113-09
- -20,400 TYX5 113.5 calls, 16 ref 113-06 to -06.5
- -9,600 TYX5 112 puts, 3 ref 113-05.5
- 3,400 wk3 TY 113 puts, 8 ref 113-04.5
COMMODITIES: Gold Hits Fresh Record High, Silver Pulls Back, Crude Lower
Oct-14 18:50
- Spot gold rose to yet another record high today, peaking at $4,179.7/oz, before paring gains. Currently, bullion is up by 1.0% at $4,150, taking total gains this month to over 7.5%.
- A bull cycle in gold remains intact and this week’s very strong start to the week reinforces current conditions. Sights are on the $4,200.00 handle, and $4,239.7, a Fibonacci projection point.
- Note that the trend is in overbought territory. A move down would be considered corrective and would allow the overbought set-up to unwind. Support lies at $3,889.7, the 20-day EMA.
- Silver also rose to a fresh-time high earlier today, before pulling back more sharply, with the precious metal currently trading 1.0% lower at $51.9/oz.
- Trend signals in silver also remain bullish, with recent gains resulting in a move above a major resistance area around the $49.00-$50.00 region. A clear break of this zone strengthens a bull theme.
- Meanwhile, copper has also pulled back today amid concerns over US-China trade tensions, with price down by 2.4% at $502/lb.
- Copper futures remain in a corrective consolidation mode, with next resistance at $550.00, the Jul 9 and 28 lows. Initial support is at $440.55, the Jul 31 low.
- WTI crude is weaker today, weighing signs of the heightened trade tensions alongside oversupply concerns.
- WTI Nov 25 is down by 1.3% at $58.7/bbl.
- The move down opens $57.50 next, the May 30 low.
