EM LATAM CREDIT: Sierracol Energy: New 5NC2 Fair Value
(SIERRA; B1/NR/B+)
IPTs: 9.5% Area FV: 9.25%
• Colombia independent oil and gas E&P company Sierracol Energy proposed issuing USD, benchmark-sized, 144a/Reg S 5NC2-Year notes. The use of proceeds will be to tender for outstanding 2028 notes and pay a special dividend.
• Colombia independent oil and gas E&P company Geopark LTD (GEOPAR; NR/B+/B+) 2030 notes were last quoted at a 10.25% yield. Sierracol has a larger scale of production and better operating results so we would expect fair value to be at a lower yield than GEOPAR.
• Brazil independent oil and gas E&P company Brava Energia (RRRPBZ; NR/BB-/BB-) has 2031 notes last quoted 9.04%. Brava has a production profile double that of Sierracol so we would expect the new issue to trade at a higher yield.
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US TSYS: Late SOFR/Treasury Option Roundup: Rate Cut Pricing Gains Slightly
Option desks report light SOFR/Treasury call option trade overnight, leaning towards low delta puts as the US Gov shutdown continues. Underlying Tsy futures firmer, off late session highs after climbing steadily off this morning's lows (TYZ5 112-09 low, September 28 level). Projected rate cut pricing has gained slightly vs. early morning levels (*): Oct'25 at -23.7bp (-23.1bp), Dec'25 at -45.1bp (-44.2bp), Jan'26 at -55.7bp (-54.6bp), Mar'26 at -66.4bp (-65.4bp).
- SOFR Options:
- +10,000 SFRZ5 96.62/96.75 call spds 0.5 ref 96.32
- +15,000 SFRZ5 96.62/96.68 call spds, cab vs. 96.30/0.05%
- Update, +12,500 SFRZ5 96.43/96.50/96.56 call flys, 0.25
- +15,000 SFRZ5 96.50/96.62 call spds, 1.0
- 1,000 SFRZ5 96.18/96.37/96.56 2x3x1 put flys
- +1,500 0QV5 96.87/97.06 strangles, 1.5 vs. 96.91/0.20%
- 1,750 0QV5 96.62/96.75/96.87 put flys, 0.5 vs. 96.955/0.08%
- +3,000 SFRZ5 96.50/96.62 call spds, 1
- -4,100 SFRV5 96.31 puts, 1.25 ref 96.315
- Treasury Options:
- 4,400 USZ5 115 puts, 51 ref 116-26
- -15,000 FVX5 108.5/110 call over risk reversals, 0.5
- 10,000 USX5 109 puts, 2 ref 116-17
- 2,000 FVX5/FVZ5 110 put spds
- 7,500 FVX5 110 calls 3, ref 109-05.5
- 3,225 TYX5/TYZ5 111/111.5 put spd spd
- +5,000 TYX5 112.5/113.5 call spds 7 over 111.25 put vs. 112-05.5/0.41%
- -1,000 TYX5 111.25/113.5 strangles, 11 vs. 112-07/0.02%
- -2,000 TYX5 112.5 calls, 24 vs. 112-12.5/0.44%
- 4,000 Tue/wkly 10Y 111.5 puts ref 112-11 (exp 10/14)
- -5,500 wk2 US 115 puts, 4 ref 116-07
- +1,000 wk3 FV 109.25/109.75 4x5 call spds, 27 vs. 109-04/0.92%
- -5,400 TYZ5 109.5 puts, 4 ref 112-14 to -14.5
MNI: US AUG CONSUMER CREDIT +$0.4B
- MNI: US AUG CONSUMER CREDIT +$0.4B
- US AUG REVOLVING CREDIT -$6.0B
- US AUG NONREVOLVING CREDIT +$6.3B
EURJPY TECHS: Fresh Record High
- RES 4: 178.94 1.236 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 3: 177.67 1.000 proj of the Jul 31 - Sep 29 - Oct 2 price swing
- RES 2: 177.00 Round number resistance
- RES 1: 176.53 High Oct 7
- PRICE: 176.51 @ 16:44 BST Oct 7
- SUP 1: 173.92 Monday’s low
- SUP 2: 172.27 Low Oct 2 and key support
- SUP 3: 171.12 Low Aug 28
- SUP 4: 170.62 Low Aug 6
The trend in EURJPY remains bullish and Monday’s strong start to this week’s session reinforces current conditions. The cross has cleared resistance at 175.13, the Sep 29 high, to confirm a resumption of the primary uptrend to hit alltime highs in the process. This maintains the bullish sequence of higher highs and higher lows and opens the 177.00 handle next. On the downside, key short-term support has been defined at 172.27, the Oct 2 low.
