EM CEEMEA CREDIT: PIFKSA: new issue deal USD 5Y and 9.5Y dual tranche
Gaci Investment Co. (PIFKSA; Aa3/-/A+)
New issue deal: USD benchmark 5Y and 9.5Y dual tranche
IPT 5Y@ T+125bp area FV @ T+100bp
IPT 9.5Y @ T+140bp area FV @ T+115bp
- We look at the FVs using the interpolated theoretical curve as well as select seasoned bonds.
- We see the proposed 5Y deal theoretical value @ z+124bp. With the seasoned benchmark PIFKSA 4.75 Feb30 charting through the curve @ z+118bp, we expect to see little, if any, NIP to theoretical, indicating FV @ z+130bp region, or T+100bp.
- We see the proposed 9.5Y deal theoretical curve value @ z+142bp. We see the curve as too flat in this part of the term structure. Hence, we prefer to lean on the seasoned bonds for interpolation, using PIFKSA 5.25 Jan34 @ z+147bp and PIFKSA 4.875 Feb35 @ z+156bp. We derive FV @ z+158bp, or T+115bp allowing some 5-6bp for NIP.
- Moody’s upgraded GRIs in Saudi Arabia to Aa3, stable outlook at the end of November ‘24. This did not come as a surprise, rather it directly followed the recent upgrade of KSA sovereign rating.
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COMMODITIES: Recent Gains in WTI Futures Still Considered Corrective
A bearish threat in WTI futures remains present and recent gains are - for now - considered corrective. A resumption of the bear cycle would open $65.57, the Oct 1 low, and $63.73, the Sep 10 low and key support. For bulls, a stronger reversal to the upside would instead refocus attention on the key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance to watch is unchanged at $71.97, the Nov 7 high. Gold traded sharply lower on Dec 18. The move down undermines a recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2642.9, the 20-day EMA. A breach of this EMA would be positive for bulls.
- WTI Crude up $0.36 or +0.52% at $69.83
- Natural Gas up $0.16 or +4.14% at $3.896
- Gold spot up $4.25 or +0.16% at $2627.82
- Copper up $2.25 or +0.55% at $412.3
- Silver up $0.22 or +0.75% at $29.7515
- Platinum up $11.14 or +1.2% at $939.11
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the recent move down highlights a corrective cycle and a short-term bear threat remains present - for now. Price has traded through the 50-day EMA, at 4922.49. The Dec 20 sell-off resulted in a print below 4846.57, 61.8% of the Nov 21 - Dec 9 bull cycle. Key short-term resistance has been defined at 5040.00, the Dec 9 high. Initial resistance is at 4935.29, the 20-day EMA. A sell-off in the S&P E-Minis contract on Dec 18 highlights a short-term top and a corrective cycle. The move down resulted in a breach of the 20- and 50-day EMAs. A resumption of weakness would open 5811.65, 38.2% of the Aug 5 - Dec 6 bull leg. Support at 5921.00, Nov 19 low, has been pierced. A clear break of it would strengthen a bearish threat. Initial resistance is 6067.90, the 20-day EMA. A clear break of it would be a bullish development.
- Japan's NIKKEI closed higher by 459.44 pts or +1.19% at 39161.34 and the TOPIX ended 24.75 pts higher or +0.92% at 2726.74.
- Elsewhere, in China the SHANGHAI closed lower by 16.812 pts or -0.5% at 3351.257 and the HANG SENG ended 162.43 pts higher or +0.82% at 19883.13.
- Across Europe, Germany's DAX trades lower by 6.33 pts or -0.03% at 19878.2, FTSE 100 higher by 5.25 pts or +0.06% at 8089.62, CAC 40 down 3.83 pts or -0.05% at 7270.15 and Euro Stoxx 50 down 6.91 pts or -0.14% at 4855.08.
- Dow Jones mini up 61 pts or +0.14% at 43374, S&P 500 mini up 20 pts or +0.33% at 6021.5, NASDAQ mini up 117.5 pts or +0.54% at 21683.
STIR: Just Under 120bp Of '25 ECB Cuts Priced
ECB-dated OIS shows ~118bp of cuts through ’25 vs. ~119bp late on Friday, while Euribor futures are 0.5-3.5 lower.
- Some are attributing the modest hawkish repricing to comments made by ECB President Lagarde.
- Lagarde told the FT that “we’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%. I’m saying that with a little reservation because I still believe that we should be very vigilant about services.”
- While the caution surrounding services inflation is worth noting, it isn’t a new source of information and has factored heavily into discussions at various stages of the ECB’s current easing cycle. She also stressed the progress towards the Bank’s inflation goal.
- As such, we don’t think this should be a major driver for STIR repricing, with weakness on EGB curves seemingly more of a driver when it comes to this morning’s moves.
- Elsewhere, ECB GC member Makhlouf reiterated his preference for 25bp cuts (pointing to heightened uncertainty in ’25).
- Meanwhile fellow GC member Vujcic stressed that the direction of policy rates is clear (signalling further cuts), noting that the evolution of data and degree of policy transmission will determine the longevity of the Bank’s cutting cycle.
- Little of note on the European calendar for the remainder of the week, which will leave focus on macro headline flow.
- A reminder that the Christmas holiday period will result in adjusted hours and closures as well as reduced liquidity and volume.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jan-25 | 2.637 | -27.9 |
Mar-25 | 2.325 | -59.1 |
Apr-25 | 2.079 | -83.8 |
Jun-25 | 1.915 | -100.1 |
Jul-25 | 1.849 | -106.8 |
Sep-25 | 1.796 | -112.0 |
Oct-25 | 1.769 | -114.8 |
Dec-25 | 1.733 | -118.3 |
