EM LATAM CREDIT: Rep. of Colombia (COLOM; Baa2neg/BB+neg/BB+neg) Bank Ratings
“Fitch Takes Action on Colombian and Central American Banks Following Colombia's Outlook Revision” - Fitch Ratings
Negative for spreads
• Colombia’s bank ratings are linked to the sovereign so Fitch’s rating outlook revision from a few days ago is being reflected. Upon a downgrade some subordinated debt might end up with ‘B’ ratings so for those investors with that concern this outlook revision could be detrimental.
• Demonstrating the underlying strength of some of these banks for example, you have Bancolombia’s sub-debt (BCOLO; Ba3/NR/BB-) the 8.625% 2034 that was quoted nearly 100 bps wide to the sovereign when it was issued June 2024 now trading 33 bps through the sovereign. That outperformance also leaves bonds vulnerable to correction.
• Banks with USD denominated debt would include Bancolombia S.A., Banco de Bogota S.A. (Bogota), Banco Davivienda S.A. (Davivienda) and Multibank, all of which have senior unsecured debt with ratings equal to the sovereign and subordinated debt notched according to rating agency criteria.
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GLOBAL POLITICAL RISK: Week Ahead 10-16 February
MNI's Political Risk team has published its Week Ahead article, looking at the major political risk events scheduled for the coming seven days.
Monday 10 February:
- China-US: Following US President Donald Trump’s imposition of 10% tariffs on almost all Chinese products entering the US, Beijing has responded with its own measures as of 10 February. A 15% levy on imports of US coal and LNG, and a 10% tariff on US oil, agricultural machinery and large-engine cars have come into force. With both the US and China having now imposed some form of trade levy on the other, focus will be on whether there is an escalation into an all-out trade war or if this now sets up Washington and Beijing for negotiations.
PIPELINE: Corporate Bond Issuance Roundup: Eli Lilly 6Pt on Tap
- Date $MM Issuer (Priced *, Launch #)
- 02/10 $Benchmark Eli Lilly 3Y +50a, 5Y +65a, 7Y +75a, 10Y +85a, 30Y +105a, 40Y +115a
- 02/10 $Benchmark Textron 10Y +125a
- 02/10 $700M Snap Inc 8NC3 7%a
- For comparison: Eli Lilly issued $5B over 5 tranches last August 8: $750M 3Y +35, $1B 5Y +50, $1.25B 10Y +70, $1.25B 30Y +88, $750M 40Y +100
US TSYS: J.P.Morgan Recommend 20s/30s Flatteners
J.P.Morgan note that “yields are unchanged to lower in ’25 and in the middle of the ranges they have held since the November election.”
- They go on to suggest that “given the good news on term premium, the coming weeks could open the debate on the asymmetric nature of the Fed’s reaction function. Thus, we look for cheap ways to position for higher yields within the current ranges.”
- They think “the 20-year sector looks rich along the curve”, recommending 20s/30s flatteners as a “low-beta bearish trade within the current range, with a relative value overlay.”
