EM LATAM CREDIT: Brazil's Rumo (RAILBZ; Ba2/BB/BB+) 4Q Earnings Results
Fourth Quarter Earnings Results
Neutral for spreads
• Brazil rail operator Rumo announced strong earnings excluding a special charge due to extreme weather events. Spreads for RAILBZ 2032 bonds widened 16bps over the past three months, last quoted T+218bps, and somewhat correlated to Brazil (BRAZIL; Ba1pos/BB/BB) currently yielding 33bps more than the sovereign.
• Transported volume was up 3% while adjusted EBITDA increased 37% thanks to improved margins and net income nearly doubled for the year. Leveraged improved with net debt/adjusted EBITDA falling to 1.4x from 1.8x the previous year.
• Capex was BRL5.5bn for the year, a 48% increase vs 2023. Management guidance for 2025 is BRL5.8-6.5bn for capex and EBITDA growth from BRL7.7bn in 2024 to BRL8.1-8.7bn in 2025.
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FED: Key Inter-Meeting Fed Speak – Jan 2025
Ahead of next week's Fed decision, we've published our summary of FOMC participant communications since the December FOMC meeting, including analysis of the latest Beige Book and MNI's Hawk-Dove Matrix.
PDF Analysis:
US: Trump Starts Second Term With Relatively Robust Approval Rating
A new survey from Reuters/Ipsos found that 47% of Americans approved of Trump's presidency as he returned to the White House this week, “a sign of a polarized nation” but “higher than it was throughout most of his 2017-2021 term.”
- The report notes that although voters largely disapproved of Trump's handing of January 6 pardons, “Respondents looked more warmly on Trump's approach to other issues. Some 46% of respondents approved of his job handling immigration, an issue many Americans would like to see as the new administration's top priority.”
Figure 1: Presidential Approval Ratings, Trump and Biden 2016-
Source: Reuters
BONDS: EGBs-GILTS CASH CLOSE: Risk Spreads Tighten Alongside Equity Gains
Core European yields rose Wednesday, with periphery/semi-core EGB spreads tightening.
- Bund and Gilt gains peaked in European morning trade, with the periphery/semi-core instruments appearing to lead the way in a session that saw European equities hit fresh record highs.
- The initial core bid faded and yields hit session highs toward the cash close, weighed down in part by higher oil prices following US President Trump's ultimatum to Russia on reaching a deal to end the war with Ukraine, and with US long-end supply looming later in the day.
- In a session with limited data, higher-than-expected UK public sector borrowing figures did little to impact Gilts, while ECB speakers at Davos including Lagarde brought no surprises and no major market reaction. Supply included Spanish and Finnish syndications, and Bund auction.
- The rise in German yields was roughly parallel across the curve at +2bp (5Y outperformed slightly), with the UK curve bear steepening.
- Periphery and semi-core EGB spreads to Bunds tightened, with OATs leading the way for a 2nd consecutive session following strong demand at Tuesday's 15Y syndication.
- Thursday's data slate is sentiment survey-focused, including French and EU confidence, with the UK GfK and CBI reports as well.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.1bps at 2.236%, 5-Yr is up 1.7bps at 2.335%, 10-Yr is up 2bps at 2.53%, and 30-Yr is up 2.2bps at 2.753%.
- UK: The 2-Yr yield is up 2.1bps at 4.355%, 5-Yr is up 1.4bps at 4.351%, 10-Yr is up 4.2bps at 4.632%, and 30-Yr is up 3.1bps at 5.182%.
- Italian BTP spread down 1bps at 107.1bps / French OAT down 3.2bps at 73.8bps
