OVERNIGHT NEWS
# Core bond yields retreat from highs as Brent crude slides below $78/bbl. DXY consolidates near 11-month high at 93.70.
# China: local Shenyang government buys 20% stake in Shengjing Bank from Evergrande for 10bn yuan ($1.55bn), company faces another coupon payment deadline today of around $45.2m on dollar bonds.
# Japan: Fumio Kishida pledges ‘trillions of stimulus by year end’ after winning LDP Party leadership contest, Kishida to be sworn in as next PM on 4 October in Parliament. # Day ahead: Lagarde, Powell, Kuroda and Bailey participate in online ECB forum, Thai CB f/c to keep policy rate unch at 0.50%
# Nikkei -2.1%, EUR 10y IRS unch at 0.166%, Brent crude -1.5% at $77.9/b, Gold +0.3% at $1,739/oz
Bond yields roared higher in September
GLOBAL
Stock futures fall amid inflation concerns. S&P 500 falls -0.68% and Dow -0.30%. Government bond yields rise, with US 10yr yield on 1.545%. Oil prices rise, WTI oil prices are rising 1.07%. In currencies, EURUSD is trading -0.16%, USDMXN 0.86%, USDBRL 0.14% and USDCOP 0.03%.
COLOMBIA
The Fiscal Rule Committee considers that the approval of Tax 4.0 is an important contribution to the sustainability of public finances. In the meeting held with the Ministry of Finance, he highlighted the chapter of the new Fiscal Rule that Colombia will have, which included a net debt anchor of 55% of GDP and a ceiling of 71% of GDP. As expressed by the committee at the meeting, this major structural change will help stabilize public finances. As is known, this mechanism will have a transition period of three years, counted from 2022, which means that in 2025 it will be fully implemented. The new goals of the Fiscal Rule will be defined on the non-structural net first balance of the Central National Government.
Iván Duque appointed Carmen Ligia Valderrama Rojas as the new ICT Minister. Iván Duque announced that Carmen Ligia Valderrama Rojas, current Deputy Minister of Transportation, would be the next Minister of the Information and Communication Technologies portfolio. Valderrama has experience in public administration, supervision and surveillance, contract law and competition. She has served as a United Nations official, university professor, and has more than 20 years of experience in business law and public management.
ANIF projects a fiscal cost of COP 5.2 trillion by 2055 for express transfer to Colpensiones. One of the most controversial articles within the 2022 General Budget of the Nation (PGN) project is 104, which authorizes the express transfer of members of private pension funds to Colpensiones. According to experts, this measure would increase the fiscal deficit in the long term, which goes against the purpose of cleaning up public finances after the pandemic. According to Anif calculations, the measure would have a net fiscal cost of COP 5.2 trillion between now and 2055. While the cost of financing the pensions of 19,000 people who could benefit would amount to COP 9.3 trillion, the resources from of individual accounts, plus the annulment of pension bonds and the contributions that these individuals make before retiring would only total COP 4.1 trillion. With which, those additional COP 5.2 trillion would have to be financed via a higher fiscal deficit.
Latin America:
Currencies in the region traded weaker, driven largely by external factors such as a stronger US dollar, higher US yields, weaker commodity prices, and lower global equity indices all pointing toward broader risk-off sentiment. MXN led the regional depreciation, weakening by 1.2% to 20.355. CLP followed, depreciating by 0.9% to 801.29, while BRL ended the session 0.7% weaker, to 5.4287. COP was the only currency to see some mild appreciation, ending stronger by 0.2% to 3835. Although there was no clear catalyst for the rally in COP, during the session the finance minister noted that economic growth in 2021 is likely to surprise to the upside, relative to the government’s 6% forecast shown in its medium-term fiscal plan.