EM LATAM CREDIT: “Fitch Affirms Rumo and its Subsidiaries' Ratings”–FitchRatings
Rumo SA (RAILBZ; Ba2 /BB /BB+)
Neutral for spreads
• Brazil commercial rail operator Rumo is controlled by its parent Cosan (CSANBZ; Ba2/BB/BB) that has a 30% stake in the company, so the ratings are somewhat linked as well as constrained by the Brazil sovereign (BRAZIL; Ba1pos /BB /BB).
• Rumo had a strong operating performance 4Q 2024 as net revenues rose 32% while adjusted EBITDA margin expanded to 46% from 44% but free cash flow was negative due to a 57% increase in capex. Rumo continues to have a strong market position in its operating regions with limited competition.
• Fitch allows for a higher rating than Cosan with the reasoning that ringfencing of Rumo allows for a higher rating than the parent.
• RAILBZ 2032 bonds were last quoted T+241bps, slightly tighter than T+252bps at year end 2024 but about 40 bps wider in just the last week. A lot of the recent widening can be attributed to widening of Latam bond spreads overall while some of it relates to fundamental concerns around transport volumes going forward and expected high capex.
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USDJPY TECHS: Bear Cycle Resumed
- RES 4: 154.80 High Dec 12 ‘24 and a key resistance
- RES 3: 152.83 50-day EMA
- RES 2: 151.30 High Mar 3 and a key near-term resistance
- RES 1: 149.65 Intraday high
- PRICE: 148.49 @ 16:29 GMT Mar 4
- SUP 1: 148.01 Low Oct 9 ‘24
- SUP 2: 147.02 2.0% 10-dma envelope
- SUP 3: 146.95 61.8% retracement of the Sep 16 ‘24 - Jan 10 bull leg
- SUP 4: 145.92 Low Oct 4 ‘24
USDJPY traded sharply lower Tuesday. The move down has resulted in a print below support at 148.57, the Feb 25 low, to confirm a resumption of the downtrend. The break lower has also resulted in a clear breach of 148.65, the Dec 3 ‘24 low. This paves the way for an extension towards 146.95, a Fibonacci retracement. On the upside, key short-term resistance has been defined at 151.30, the Mar 3 high. Clearance of this level is required to signal a base.
US STOCKS: Late Session Rebound
- US stocks are making a recovery since midday, Nasdaq in the green as Tech sector of all places lead the bounce with Super Micro Computer Inc, Enphase Energy Inc and First Solar Inc all up 5.5-8.5% at the moment.
- DJIA down 266.35 points (-0.62%) at 42503.93
- S&P E-Mini Future down 15.5 points (-0.26%) at 5774.5
- Nasdaq up 104.5 points (0.6%) at 18144.75
EURGBP TECHS: Bear Threat Remains Present
- RES 4: 0.8378 High Feb 6 and a reversal trigger
- RES 3: 0.8361 50.0% retracement of the Jan 20 - Feb 3 bear leg
- RES 2: 0.8325 50-day EMA
- RES 1: 0.8306 High Feb 26 and a key short-term resistance
- PRICE: 0.8281 @ 16:28 GMT Mar 4
- SUP 1: 0.8241 Low Mar 3
- SUP 2: 0.8223 Low Dec 19 and a key support
- SUP 3: 0.8203 Low Mar 7 ‘22 and a lowest point of a multi-year range
- SUP 4: 0.8163 123.6% retracement of the Dec 19 - Jan 20 bull leg
EURGBP traded higher into the Tuesday close. A bearish condition remains intact following last week’s move lower. The cross has pierced a key support at 0.8248, the Feb 3 low. A clear breach of this level would strengthen the bearish condition and pave the way for 0.8223 , the Dec 19 low and the next key support. To the upside, initial firm resistance has been defined at 0.8306, the Feb 26 high. Clearance of this hurdle would suggest a possible base and a reversal.
