EM LATAM CREDIT: Republic of Panama (PANAMA; Baa3neg / BBB- / BB+): Copper Mine
“He added that the economic benefit of the mine is needed 'at full speed.' “ – La Prensa Panama
Positive for spreads
• A positive development in the issue of re-opening of the copper mine that used to contribute 5% of Panama’s GDP.
• It seems that Panama’s President Jose Mulino will make the decision of whether to re-open the Cobre Panama copper mine and not take the issue to the Assembly, according to La Prensa Panama with their coverage of his weekly press conference.
• President Mulino was supportive of reopening the mine and in a hurry to do so, saying that the “economic benefit is needed at full speed.” He used a nationalistic stance to gain support for the measure saying, “the mine is Panamanian and Panama will exploit it”.
• The framework for a comprehensive audit, developed with the support of the Inter-American Development Bank (IDB), was confirmed a few days ago by The Minister of Commerce and Industry, Julio Moltó, as reported by La Prensa Panama.
• There was mass civil unrest back in 2023 when the government was pressured to close the mine and while those environmental concerns likely still exist there is likely also an awareness of the economic importance of the mine.
• President Mulino proposed that the government would partner with a third party to handle the technical aspects of operating the mine on behalf of the country as the owner. There will not be a contract for the mine as was previously.
• Canada based First Quantum was the previous operator of the mine, so a reopening of the mine seems positive for them unless the government were to partner with someone else. That will likely be left up to further negotiations.
• Panama 10-year bonds were last quoted T+302bps, unchanged MTD and 13 bps tighter YTD. That was much wider than other ‘BBB’ rated Latam sovereign bonds like United Mexican States (MEX; Baa2neg / BBB / BBB-) 10-year notes quoted T+220bps and Republic of Peru (Baa1 / BBB- / BBB) at T+134bps.
• For more information on First Quantum please see our earnings review from earlier today: https://mni.marketnews.com/3RzBXrZ
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US: FED Reverse Repo Operation
RRP usage rebounds to $214.786B this afternoon from $196.565B Monday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 48.
US: GOP Leaders To Meet This Afternoon To Discuss Trump's Agenda In Congress
The “Big Six” Republican leaders – House Speaker Mike Johnson (R-LA), Senate Majority Leader John Thune (R-SD), tax committee chairs, Treasury Secretary Scott Bessent, and Director of the National Economic Council Kevin Hassett will meet at 16:00 ET 20:00 GMT to discuss strategy for legislating President Donald Trump’s agenda.
- The Senate and House must agree on a compromise budget resolution for reconciliation that can pass both chambers. Thune indicated he wants a vote during this Congressional work period, giving them 17 days.
- Trump has endorsed the House-passed budget resolution that underpins a mammoth package to cover the bulk of Trump’s agenda, enact sweeping spending cuts, and raise the federal debt limit.
- The Senate, unconvinced by the House plan, is eying the possibility of a standalone debt limit bill and an effort to make Trump’s 2017 Tax Cuts and Jobs Act (TCJA) permanent, rather than just passing an extension.
- Thune and Bessent argue a budget fudge that would set the cost of TCJA permanence at zero dollars is the optimum strategy for avoiding deep cuts to safety net programmes like Medicaid and food stamps.
- For the plan to work, Senate leaders must convince the Senate Parliamentarian Elizabeth MacDonough to greenlight the budgetary move, which would use a ‘current policy’ baseline rather than the Congressional Budget Office’s preferred ‘current law’ baseline.
- Should MacDonough endorse the proposal, Johnson and Thune will then need to convince deficit hawks that the move isn’t merely a trick to obscure deficit spending.
FOREX: USDJPY Reverses South, Focus Shifts to GBP as CPI/Spring Statement Awaits
- In stark contrast to yesterday’s price dynamics in G10 FX markets, USDJPY is now the worst performing major pair, reflective of the pull lower for US yields. While the pair is 0.6% lower on Tuesday, and 120 pips off the overnight highs, spot still remains higher on the week.
- Today’s peak print of 150.94 closely matched a firm resistance for the pair, respecting both the Feb 07 low and the 50-day EMA. A clear break of this area would signal scope for a stronger rally.
- Overall, the primary trend direction is down, and recent gains are considered corrective. A resumption of weakness would refocus sights on initial support at 148.18, the Mar 20 low. Further out, key support and the bear trigger remain at 146.54, the Mar 11 low, of which clearance would resume the technical downtrend.
- GBPUSD remains a touch firmer this week, just above 1.2950, ahead of the plethora of short-term risk events for the UK. Standing out here are the Spring Statement and UK inflation data which are due on Wednesday.
- Please see the attached report for the latest analyst views on GBP, as well as a full technical update for a number of GBP crosses: https://mni.marketnews.com/4c0UAhX
- EURUSD has exhibited a 53pip range on the session, broadly consolidating just above the 1.0800 handle. The pair’s pullback from the 1.0955 highs has so far fallen just shy of initial targets/support, with the bullish trend outlook remaining unchanged for now.
- However, a corrective technical phase remains in play. First support to watch remains a touch below the overnight lows at 1.0765, the 20-day EMA. Below here, 1.0624 represents a more significant support, the 50-day EMA and a short-term pivot level.
- In emerging markets, the Brazilian real is the best performing currency following a hawkish tilt to the latest set of central bank minutes. USDBRL has fallen 1.25% to levels around 5.69 as we approach the close.
