OVERNIGHT NEWS
# Evergrande to make yuan coupon payments tomorrow after negotiations with onshore bondholders, no word on $83.5m offshore dollar coupon payments (30-day grace period before technical default). Separately, PBoC injects CNY90bn liquidity, 1y and 5y loan prime rates unchanged at 3.85% and 4.65% respectively; USD/CNY +0.10% at 6.4710
# BoJ leaves policy rate on hold at -0.10% and 10y JGB yield target at about 0%, economic assessment unchanged but officials see production and supply chains taking a hit from the pandemic, USD/JPY +0.2% at 109.50
# Fed FOMC decision at 8pm CET followed by Powell press conference: dollar and Treasuries await clues on tapering timeline (November?), updated dot-plot 2022-2024 (more increases?)
# Also on tap today: Brazil CB f/c to raise Selic rate by 100bp, South Africa CPI, Russia industrial production Nikkei -0.5%, CSI 300 -0.7%, EUR 10y IRS unch at 0.06%, Brent crude +1.1% at $75.2/b, Gold +0.2% at 1,778/oz
Futures discount more hawkish dot plot at today’s FOMC meeting
USDCOP drivers Tuesday
GLOBAL
Stock futures bounce after concerns about the Chinese property sector. The S&P500 rises 0.54% and Dow 0.61%. Government bond yields fall, with US 10yr yield on 1.324%. Oil prices rise, WTI oil prices are rising 0.73%. In currencies, EURUSD is trading 0.05%, USDMXN -0.17%, USDBRL -0.22% and USDCOP 0.08%.
COLOMBIA
In August 2021, the Government’s foreign currency debt rose to 38.53% of the total from 36.87% in the same month of 2020. If it is compared with December of last year, when it stood at 36.19%, an increase of 2.34 percentage points is observed so far in 2021. Meanwhile, the percentage of debt in local currency fell to 61, 49% in August from 61.55% in July and from 63.13% in the same month of 2020. Debt in dollars already represents 34.94% of the total, when a year ago the percentage was 33.12%. Obligations in euros, on the other hand, had a slight decrease in this same period, going from 3.75% to 3.59%. It must be taken into account that the debt in pesos between August 2020 and the same month of 2021 decreased from 45.14% to 43.94%. In addition, the denominated in UVR went from 17.99% to 17.53%.
Fedesarrollo Industrial Confidence Index fell 0.7 percentage points in August 2021 compared to July to 15.6%. However, compared to the same month of 2020, there was an increase of 14.2%. The slight drop in this index in August compared to the previous month is mainly due to a 1.7% reduction in the current volume of orders, together with a 1.3% increase in the level of inventories. In contrast, an increase of 0.9% was observed in the production expectations indicator for the next quarter. The increase in industrial confidence compared to August 2020 is due to an increase of 23.3% in the current volume of orders, the increase of 12.7% in the indicator of production expectations for the next quarter and a reduction in the stock level of 6.5%.
In August 2021, Fedesarrollo Business Confidence Index rose 7.7 percentage points compared to July to 43.5%. With respect to the same month of 2020, the increase was of the order of 29.7 percentage points. However, the increase in merchant confidence compared to the previous month is mainly due to the 9.9% increase in the current economic situation indicator and the 7.5% reduction in the level of inventories. Likewise, an increase of 5.8% was observed in the economic situation expectations indicator for the next semester. For its part, the result compared to August 2020 is due to a 39.6% growth in the economic situation expectations indicator for the next semester, the 38.0% increase in the current economic situation indicator and the 11.5% decrease in the inventory level.
Solvency level of the financial system in July 2021 was 21.81%: it fell two basic compared to June. In July, the total solvency of the financial system had been located at 21.83%; in May, at 21.96%; in April, at 21.66%; in March, at 21.11%; in February, at 21.36%; in January, at 21.54%; and in December 2020, at 17.21%. That of only banks, meanwhile, remained at 20.3% in July. By entity, the newcomer Lulo Bank, was the one with the highest level of solvency in the country at the end of July 2021: 427.5%; it was followed by JP Morgan Colombia, with 65.2%. In third place was the GNB Sudameris with 30.86%. Banco de Bogotá ranked fifth with 28.02%. Davivienda was in the tenth box with 22.79%. Bancolombia was ranked 13 with 20.51%. Below the average solvency of all banks in the seventh month of the year, were Banco Santander (17.24%), Itaú (14.23%), Scotiabank Colpatria (13.98%), Bbva Colombia (13 , 64%), Banco Popular (13.55%), Banco Av Villas (13.35%) and Banco de Occidente with 11.95%. Banco Falabella closed the ranking, with a solvency level of 11.48%, 2.48 percentage points above the regulatory minimum, which is 9%.
Notwithstanding S&P downtick, risk-asset stabilization follows Monday’s capitulation; peripheral EGBs outperform as USTs temper early bear-steepening; BoJ, Fed, BCB meetings ahead; US 10y at 1.323% (+1.2bp)
Latin America:
Currencies in the region saw a mild rebound after the previous session’s global risk selloff. BRL led the recovery, strengthening 1.1%, to 5.2642, in line with the broader regional trend and aided by local headlines regarding the government stating it is looking for options to pay-off debt to regional governments. These headlines also supported DI rates, which outperformed other local curves in the region, seeing the Jan 27 DI rate end 23bp lower at 10.31%. CLP and PEN ended the session stronger 0.2% each, to 786.54 and 4.1107, respectively. Chilean local rates also twist flattened with 2s10s flattening 3bp, to 97bp as the government stated that it may have the votes to reject the fourth round of pension withdrawals.