EM LATAM CREDIT: Brazil's Vale (VALEBZ; Baa2pos /BBB- /BBB) 1Q Earnings Miss
“Vale 1Q Pro Forma Ebitda Misses Estimates” - BBG
Neutral for spreads
• Top 3 global iron ore miner based in Brazil Vale produced weak results with sales down 20% QoQ and adjusted EBITDA 18% lower. Sales fell 4% YoY driven by a 10% drop in iron ore prices.
• Free cash flow was 77% lower YoY while net debt rose 16% sequentially and 21% YoY. Despite those setbacks, net debt/EBITDA remained low at .8x vs .7x last quarter and .6x a year ago.
• VALEBZ 2054s issued June 2024 at T+210bps were last quoted T+201bps, 11 bps wider MTD.
• Vale remains a low cost producer of high quality iron ore with a strong balance sheet so the overall story remains intact from a bondholder’s perspective.
• Earnings report link:
https://api.mziq.com/mzfilemanager/v2/d/53207d1c-63b4-48f1-96b7-19869fae19fe/d48b666d-268f-8226-ffa4-8dae96818831?origin=2
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JPY: Broad JPY Weakness Placing Trend Signals Under Pressure
USD/JPY breaks through the morning highs on the latest leg lower for JPY, pushing the pair within range of Y150.94, the recovery high and next real resistance. 150.96 also marks the 50-day EMA, a break above which would be the latest counter-trend signal and could signal scope for a stronger rally.
- The cross-asset price action with equities is another reminder that the intraday stocks x USD/JPY correlation remains inconsistent. We noted earlier today the importance of the 50-dma in AUD/JPY, a level that's again being tested having contained rallies on several occasions over the past two months - that's also under pressure here Y95.37 and a break above would mark a further signal that the bear phase off the year's high may have concluded.
STIR: BoE Pricing Back To Pre-Spring Statement Levels, 45bp Of Cuts Through Dec
GBP STIRs followed swings in the long end over the Spring Statement, before stabilising close to pre-event levels.
- BoE-dated OIS show 45bp of cuts through year-end vs. 40bp at yesterday’s close and ~48bp at one point today.
- 18bp of cuts showing for May, 21bp through June and 31.5bp through Aug.
- We continue to look for the next cut in May, matching the wider sell-side consensus.
- Nothing seen at today’s fiscal event changes that view.
- Markets have been unwilling to price less than 40bp of cuts in recent days, given the BoE’s continued preference for gradual cuts.
- SONIA futures are flat to +7.0, after registering session lows around the budget.
- Those of a dovish disposition may look to sell SFIM5/Z5 given the spread’s proximity to multi-week closing highs and the relatively shallow degree of cuts priced into that spread at present, particularly with the direction of travel for Bank Rate clear, albeit with the speed of further cuts in question.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.276 | -18.1 |
Jun-25 | 4.250 | -20.7 |
Aug-25 | 4.143 | -31.4 |
Sep-25 | 4.108 | -34.9 |
Nov-25 | 4.033 | -42.4 |
Dec-25 | 4.006 | -45.1 |
Fig. 1: SONIA Jun ‘25/Dec ’25 Spread (SFIM5/Z5)
Source: MNI - Market News/Bloomberg
FED: US TSY 1Y-10M FRN AUCTION: NON-COMP BIDS $15 MLN FROM $28.000 BLN TOTAL
- US TSY 1Y-10M FRN AUCTION: NON-COMP BIDS $15 MLN FROM $28.000 BLN TOTAL
