EM LATAM CREDIT: Province of Santa Fe: New Issue 7.5Yr WAL Fair Value
(PROVSF; B3/NR/B-)
IPTs: N/A FV: 8%
• One of Argentina’s largest regional governments, the Province of Santa Fe, has proposed issuing USD benchmark-sized, 144a/Reg S, senior unsecured 7.5yr notes. The use of proceeds will be to fund infrastructure projects and refinance existing debt.
• Our fair value of 8% places PROVSF new 7.5Yr notes wide to City of Buenos Aires (BUEAIR; B2/B-/B-) which recently issued 2033 notes that currently have a 7Yr WAL and yield 7.75% but tighter than the bonds of another large Argentina province, Cordoba (PDCAR; B3/NR/B-), that issued 2032 amortizing notes currently with a 5.5Yr WAL that yield 8.75%.
• We observe Argentina government-controlled energy company YPF (YPFDAR; B2/B-/CCC+) 2034 amortizing notes with a 7.2Yr WAL that yield 8.125% and believe PROVSF should trade a little inside of YPF given that the energy company restructured its debt in 2021. Also, YPF has an ambitious capex program to develop assets in the Vaca Muerta region while PROVSF had negative net debt as of 2024 according to Fitch.
• PDCAR restructured its debt in 2021 which was influenced by the Argentina sovereign debt restructuring that occurred the previous year. On a positive note, Province of Santa Fe along with the City of Buenos Aires chose not to restructure.
• We view BUEAIR as the strongest of Argentina’s regional governments and Fitch gave the City of BA a standalone ‘BB-‘ rating. Province of Sante Fe is not far behind in credit profile strength with a standalone ‘B’ rating from Fitch with similar strong liquidity and debt service coverage, but has a higher dependence on Federal transfer payments for revenues.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
