EM LATAM CREDIT: Republic of Argentina (ARGENT; Caa3pos/CCC/CCC): IMF Approval
“The government is accelerating the debate on the agreement with the IMF and is focusing on securing votes in the House of Representatives.” - Infobae
Neutral for prices
• President Milei signed a decree (DNU; Decreto de Necesidad y Urgencia) which empowered him to contract a new credit program with the IMF and remains effective as long as both houses of congress don’t reject it.
• In the coming days, there is a government commission that will review the decree, issue an opinion and then submit it to the legislature for review. The commission is comprised of 16 people, evenly split between supporters and opposition.
• Among the administration’s typical supporters is the Propuesta Republicana (PRO) party but former President Mauricio Macri and his cousin the head of City of Buenos Aires Jorge Macri both publicly objected to the use of the decree instead of going for approval directly to Congress.
• PRO party support is crucial in getting the decree passed by the Commission, so their disapproval of the use of the decree creates uncertainty. There will also be a lot of political negotiating with provincial governors and legislators in the coming weeks to get the decree passed.
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SECURITY: Zelenskyy Eyes High-Level Talks With Trump Admin Ahead Of Munich Conf.
Ukrainian President Volodymyr Zelenskyy says Ukrainian and US teams are working on arranging a meeting between Zelenskyy and US President Donald Trump, according to Ukrainian media outlet Unian, cited by Reuters.
- According to Unian, top Trump administration officials will visit Ukraine this week and Zelenskyy intends to meet with US Vice President JD Vance at the Munich Security Conference, which kicks off on Friday, February 14. Vance is currently on his first trip abroad since taking office. He will speak at an Artificial Intelligence summit in Paris this evening.
- Ukrainian and Russian spokespeople have managed expectations that any armistice talks can be initiated without significant concessions on security guarantee from the other side, lowering optimism that a breakthrough can be reached in Munich.
- The conference will proceed without any representation from Russia, echoing the June 2024 'Summit on Peace in Ukraine', which failed to move the conflict closer to a resolution.
- The Financial Times reports that, according to a leaked internal Russian presentation from Prime Minister Mikhail Mishustin last April, the Kremlin recognises that, "Western sanctions pressure, as well as economic overtures, had succeeded in driving a wedge between Moscow and some of its nearest trade partners."
BONDS: EGBs-GILTS CASH CLOSE: Gilts Modestly Outperform
Gilts modestly outperformed Bunds Monday.
- Core European bonds faded slightly in the post-weekend re-open, with EGBs weighed down by higher gas prices, and only a fairly muted reaction to US President Trump's declaration of steel and alluminium tariffs.
- With no Tier 1 data on Monday's schedule, Bund and Gilt yields drifted lower in afternoon trade amid a modest pickup in market bids though no clear headline catalyst - all within last week's ranges.
- ECB's Lagarde reiterated in her remarks to the EU Parliament that inflation remains on track to reach 2% but that "greater friction in global trade would make the euro area inflation outlook more uncertain.”
- The UK and German curves moderately bull steepened on the day. Front-ends were boosted by an extension of central bank cut pricing (ECB end-2025 to 90bp vs 87bp Friday, BoE to 65bp from 60bp).
- Periphery EGB spreads were mostly tighter, with Greece's widening slightly (BTPs saw little reaction to an Italy syndication 15Y syndication announcement, which had been anticipated by MNI).
- Tuesday's agenda includes pricing of the syndication of the new 4.50% Mar-35 gilt and scheduled comments from BoE’s Bailey & Mann (see MNI's Gilt Week Ahead for more, PDF), while ECB's Schnabel speaks on a panel.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.2bps at 2.026%, 5-Yr is down 1.1bps at 2.142%, 10-Yr is down 1bps at 2.362%, and 30-Yr is down 0.6bps at 2.615%.
- UK: The 2-Yr yield is down 2.2bps at 4.146%, 5-Yr is down 2.6bps at 4.147%, 10-Yr is down 1.9bps at 4.457%, and 30-Yr is unchanged at 5.056%.
- Italian BTP spread down 0.6bps at 108.8bps / French OAT up 0.5bps at 72.4bps
ITALY AUCTION PREVIEW: On offer Thursday
The MEF has announced that it will look to sell:
- E2.75-3.25bln of the on-the-run 3-year 2.70% Oct-27 BTP (ISIN: IT0005622128)
- E1.0-1.25bln of the off-the-run 3.45% Jul-31 BTP (ISIN: IT0005595803)
- E1.0-1.25bln of the on-the-run 7-year 3.15% Nov-31 BTP (ISIN: IT0005619546)
- As announced earlier, the 15+ year BTP line was cancelled to facilitate the Oct-40 BTP syndication (due to take place tomorrow).
