EM LATAM CREDIT: Trinidad & Tobago's Trinidad Generation Potential New Issue FV
Trinidad Generation Unlimited (TRNGEN; NR/BB+NEG/BB)
IPTs 8Y Final, 7Y WAL: N/A
FV 8Y Final, 7Y WAL: 8.25% Area
• Trinidad and Tobago electric company Trinidad Generation Unlimited mandated investor calls and a potential USD benchmark senior unsecured 8-year final, 7-year weighted average life (WAL) note. The company proposed tendering for any and all 2027 notes contingent on the success of this potential long-term note financing.
• The 2027 notes have begun amortizing and S&P put Trinidad Generation’s ratings on negative outlook with the concern that the company did not have sufficient internally generated cash flow to make payments at some point in the future without refinancing the debt.
• Trinidad Generation is owned by a government owned company National Investment Fund Holding Company and has long term purchase power agreements with the state-owned Trinidad and Tobago Electric Commission. Those payments are in turn guaranteed by the government. We note that the S&P rating is lower than the sovereign and on outlook negative.
• Trinidad and Tobago (TRITOB; Ba2/BBB-/NR) sovereign bonds trade around 6.75% when interpolating the 6-year and 9-year bonds. We note that the bonds of government owned electric company of Mexico, CFE (CFELEC; Baa2NEG/BBB/BBB-) are quoted about 60 bps spread to the Mexico (MEX; Baa2NEG/BBB/BBB-) sovereign.
• However, Trinidad Generation is not owned by the government so we think the spread to the sovereign should be wider. We also note that balance sheet leverage is over 7x now, expected to decline back to about 6x according to Fitch. The rating agency expects flat to negative free cash flow and a larger than usual capex program to renovate facilities.
• Another comp could be government owned Trinidad Petroleum Holdings which owns Heritage Oil (TPHLTT; Ba3/BB/BB) and guarantees their bonds. The Heritage Oil 2029 bonds were quoted 8.1%.
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USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
