A quiet overnight session saw some of the week’s trends reverse, some extend, and others turn range-bound amid limited developments with a market that is waiting for the Fed’s policy announcement at 14ET.
Amid the various markets, a leg higher in SPX futures and the USD-negative mood in European hours are the clearest of all, though the index’s contracts are only up 0.2% on the day and the dollar is just 0.1/2% weaker against a broad basket of currencies (including the MXN). The US yield curve is slightly steepening with Treasurys trading much more quietly after yesterday’s ~20bps intraday jump in 2s. Oil (with some support from US SPR refill plans) and iron ore are about 1% stronger, compared to flat copper prices.
The Latam and US data calendars have but April Brazil retail sales and US PPI ahead in terms of data. This is against a more notable events schedule where the Fed’s decision is the global market highlight while local markets will follow the results of the BCCh’s traders survey at 8.30ET (economists survey showed a 50bps cut at the July meeting) and the presentation of Colombia’s medium-term fiscal framework at 16ET. Ahead of that, BanRep Gov Villar speaks at 10ET and 15ET at separate events in Cartagena.
From our latest Latam Weekly, “Colombia’s MinFin will release its Medium Term Fiscal Framework, a document that presents fiscal plans for the next ten years. Minister Bonilla has guided that the 2023 fiscal deficit could be revised higher from 3.8% of GDP to something around 4.2/43% of GDP, which would still be in compliance with the fiscal rule. However, it will be important to watch whether these revisions result in significant changes to the country’s debt issuance plan.”
Indeed, yesterday the government revised the fiscal deficit projection to 4.3% of GDP, increasing the 2023 budget by COP16.9tn, and as expected the revised macroeconomic forecasts mean the budget increase complies with the fiscal rule. So, with that out of the way, today’s focus will be on the longer-term outlook and on funding plans.
In political news, the government’s pension reform plan is moving through the debate steps in Colombian congress. Yesterday, 87% of the project was approved in the Seventh Senate Commission, with debate continuing today on the remainder—all ahead of tougher contests in following steps towards (possibly) being legislated.
—Juan Manuel Herrera
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