EM LATAM CREDIT: Republic of Colombia (COLOM; Baa2neg/BB+neg/BB+neg): IMF
“Colombia’s continued qualification for the IMF’s Flexible Credit Line (FCL) is contingent on the completion of both the ongoing Article IV consultation and a subsequent FCL mid-term review.” – IMF
Negative for spreads
• The IMF issued a statement over the weekend announcing that Colombia’s Flexible Credit Line (FCL) granted in April 2024 for two years for about USD8bn is now contingent on consultations currently taking place. The country previously drew down a FCL in 2020 of which (SDR1.406bn) about USD1.9bn is still outstanding according to the IMF website.
• The IMF has been conducting a planned mid-term consultation with the government and already released a statement on April 18, 2025 announcing that they would look for fiscal reforms to close the fiscal deficit.
• The IMF pointed out the higher-than-expected fiscal deficit, that gross debt/GDP rose to 61% in 2024 and that due to lack of liquidity there was a 2.8% of GDP budgetary backlog.
• Colombia’s 2024 tax revenues disappointed leading to a higher-than-expected fiscal deficit of 6.7%. The government targeted a 5.1% fiscal deficit in their budget plan presented earlier this year. Government attempts at tax reform in 2024 failed while there hasn’t been any progress on budget cuts. The new finance minister German Avila said there was little room for social spending cuts and meanwhile President Petro has proposed labor, health and various other reforms that could increase the deficit further.
• Additionally, inflation printed higher than expected leading to a delay in the central bank cutting rates as well as FX devaluation that has been especially expensive for Colombia with 48% of debt financed externally mostly in USD.
• Oil prices are down 11% YTD and new explorating for oil and gas has been prohibited by the government in President Petro’s administration so that is limiting one of the country’s top sources of hard currency.
• These fiscal challenges are well known leading to yields and spreads much higher than the country’s rating would suggest. Colombia 8% 2035 bonds were last quoted T+390bps, 26 bps MTD. Those bonds are quoted154 bps wider than Brazil (BRAZIL; Ba1pos/BB/BB) 2035s and only 5 bps tighter than El Salvador (ELSALV;B3/B-/B-) 2035s.
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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.
