EM LATAM CREDIT: Mexico's Gruma SAB (GRUMAB; NR/BBBpos/BBB+) 4Q Earnings
Fourth Quarter Earnings Results
Neutral for spreads
• Mexican tortilla and corn flour maker Gruma reported solid earnings with EBITDA up and debt lower. Spreads of 10- and 30-year bonds issued in December 2024 were stable over the past three months with the 10 year last quoted T+120 after being issued at T+120 and ranging from T+110-126bps while the 30 year last quoted T+142bps after being issued at T+140bps and ranging from T+124-150bps.
• 4Q EBITDA was up 7% with EBITDA margins improving 210bps to 18.8% from 16.7% y/y. Sales were down 5% while the cost of goods sold dropped 10% due to improved efficiencies. Sales from non-Mexican operations comprised 73% of total consolidated figures.
• Debt declined 12% y/y while net debt/EBITDA fell to 1.2x from 1.5x last year.
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US TSYS/SUPPLY: Review: $13B 20Y Bond Auction Re-Open Trades Through
Tsy futures bounce off lows (TYH5 trading 108-17, -6.5), after decent $13B 20Y bond auction re-open (912810UF3) breaks two-consecutive tails, trading 1bp through: 4.900% high yield vs. 4.910% WI; 2.750x bid-to-cover vs. prior month's 2.50x.
- Indirect take-up rises to 69.52% vs. 62.00% last month; direct bidder take-up 20.08% vs. 20.1% prior; primary dealer take-up falls to 10.40% vs. 17.90% prior.
- The next 20Y auction is tentatively scheduled for February 19.
FOREX: Higher Core Yields/Equities Weighs on JPY, Supportive of EMFX Recovery
- Major equity indices have continued their impressive advance on Wednesday, consistently weighing on the Japanese Yen throughout the US session. This has allowed USDJPY to outperform, rising around 0.75% to 156.65 as we approach the APAC crossover. Higher core yields have also been supportive of this price dynamic, while a 4bp move for 5-year treasury yields also provided support to the broader dollar index.
- USDJPY move extends the rally from Tuesday’s lows to around 1% ahead of Friday’s BOJ meeting, where a hike is broadly expected, especially due to no market turbulence in the aftermath of Trump’s inauguration. Support to watch is 155.00, the 50-day EMA, and 154.48, a trendline drawn from the Sep 16 ‘24 high. Key resistance and the bull trigger remain at 158.87, the Jan 10 high.
- Elsewhere, initial price action saw the Euro extend its most recent strength, pushing to a new 2025 high of 1.0457 against the greenback. The rally was met with firm resistance at the 50-day EMA and the pair has subsequently drifted lower, back to 1.0415.
- Broader risk optimism has been particularly supportive of the emerging market FX basket, highlighted by a significant rally for the Brazilian Real. After breaking the psychological 6.00 mark, USDBRL picked up momentum through the 50-day EMA, extending session lows below 5.92 ahead of the close. All LatAm peers have also trade in a bullish manner.
- Additionally, EURPLN (-0.65%) looks set to close below the key 4.25 handle for the first time since the early onset of the pandemic, with the zloty buoyed by recent hawkish communication from the NBP.
- Canada retail sales and US jobless claims headlines the docket on Thursday, however, the focus may be on any commentary from political leader at the WEF in Davos.
FED: US TSY 19Y-10M BOND AUCTION: HIGH YLD 4.900%; ALLOT 98.74%
- US TSY 19Y-10M BOND AUCTION: HIGH YLD 4.900%; ALLOT 98.74%
- US TSY 19Y-10M BOND AUCTION: DEALERS TAKE 10.40% OF COMPETITIVES
- US TSY 19Y-10M BOND AUCTION: DIRECTS TAKE 20.08% OF COMPETITIVES
- US TSY 19Y-10M BOND AUCTION: INDIRECTS TAKE 69.52% OF COMPETITIVES
- US TSY 19Y-10M BOND AUCTION: BID/COV 2.75
