EM LATAM CREDIT: PEMEX 2030 Plan
Petroleos Mexicanos (PEMEX; B3neg/BBB/B+)
PEMEX 2030 Plan
Neutral for spreads
• PEMEX 2050 bonds have traded in a spread range of T+532-588 bps in the past three months, last at T+582, 10.66% ytm with the spread to the MEX sovereign ranging from 326 – 365bps, last 365bps. Overall neutral for spreads with bad news already priced in and nothing here suggests improvement.
• Investment plans up to year 2030 include MXN220bn for oil exploration, MXN238bn for gas exploration, MXN20bn for petrochemicals and MXN8bn for fertilizer. Security measures will be improved to prevent fuel theft. Pemex will work with the government on supplier / bond payments. Pemex will rehabilitate six refineries for MXN105bn.
• Capital investment is good if it ultimately leads to an improvement in oil and gas production, which lately has been disappointing. For refining, Dos Bocas was a huge investment with a cost of USD19bn but production has been disappointing. We have been hearing about government support to pay past suppliers but still no concrete details.
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STIR: Around 45bp Of BoE Cuts Still Priced Through Year-End
Stabilisation away from session lows also evident in GBP STIRs as the day progresses, leaving 44bp of cuts priced through year-end and SONIA futures little changed to -4.5 on the day.
- UK headline flow limited since PM Starmer’s comments that underscored the government’s desire to stick to the fiscal rules and generate growth, while underscoring its willingness to make difficult spending decisions.
- We will hear from BoE’s Breeden again on Tuesday, but as is the case with most of her speeches, there is unlikely to be much on monpol.
- More focus will be placed on comments from dovish dissenter Taylor later in the week, as well as Wednesday’s CPI data.
EQUITIES: US Opening calls
US Cash open is set for a steady, stable start with futures mostly trading in a holding pattern for the past 2hours ahead of a very busy Week.
- Calls: SPX: 5,791.0 (-0.6%); DJIA: 41,917 (-0.1%/-22pts); NDX: 20,645.5 (-1.0%).
STIR: More SOFR Put Trade
Better put flow continues even as underlying futures pare losses. Note large Jun'25 strangle buyer:
- 5,000 SFRJ5 95.50/95.56 put spds ref 95.83
- +10,000 SFRM5 95.56/96.12 strangle, 12.00 ref 95.83
- -10,000 SFRU5 95.37/95.56 put spds vs 5,000 SFRM5 95.62/95.87 put spds, 5.75-6
- -15,000 SFRU5 95.18/95.43 put spds v SFRZ5 95.87/96.06 put spds, 7.5-7.25
- -4,000 SFRZ5 95.18 puts 0.5 over 96.12/96.62 call spds vs 95.88/0.38%
- +4,000 SFRZ5 95.25 puts, 13.5 vs. 95.88/0.25%
