• The Director of the Western Hemisphere Department at the International Monetary Fund (IMF), Ilan Goldfajn, says the Washington DC-based financial institution is paying close attention to the sovereign debt exposure of regional banks, especially where recent external shocks have significantly stretched public sector balance sheets. 
• He explains that 'Banks with highly concentrated exposures, mainly where these are systemically important institutions, can complicate recovery efforts if sovereign debt sustainability risks materialize.' Therefore, the risks associated with sovereign debt linkages are best mitigated by governments pursuing sustainable fiscal policies and making use of the available concessional financing opportunities. 
• Goldfain also noted that it is essential that financial supervisors promptly identify pockets of excessive risk exposures, enforce and/or tighten exposure concentration limits where warranted, and ensure banks' and other financial institutions' loss-absorbing buffers are commensurate to the risks taken. 
• The Caribbean Community (CARICOM) Secretary-General, Dr. Carla Barnett, said the operationalisation of an integrated country risk management framework, robust enough to strengthen social safety nets, with the capacity to adapt to shocks, will allow the region to 'build back better' following the various 'challenges', including the coronavirus pandemic. 
• Consequently, the newly established Resilience and Sustainability Trust (RST), combined with the additional financing will help catalyse and support countries in building resilience to external shocks, including climate change and pandemic preparedness, and ensuring sustainable growth.

(Source: Trinidad Express Newspapers)

• Employment openings exceeded the level of available workers by 5.6Mn in March while a record number of people quit their jobs, the Labour Department reported Tuesday. The level of job postings hit 11.55Mn for the month, also a fresh record for data that goes back to December 2000, according to the Job Openings and Labour Turnover Survey. That was up 205,000 from February and representative of a job market still historically tight. 
• At the same time, quits totaled 4.54Mn, an increase of 152,000 from the previous month as the so-called Great Resignation continued. The Covid pandemic era has seen opportunities for workers who feel confident enough to leave their current situations for better employment elsewhere. 
• The report adds to an inflationary picture that is expected to push the Federal Reserve into a series of aggressive rate hikes, starting with a half-percentage point move Wednesday. 
• A shortage of labour supply during the pandemic has caused a surge in wages, with average hourly earnings up 5.6% from a year ago in March. Still, that hasn’t kept up with inflation, which has run at an 8.5% pace over the same time period. Supply failed to keep up with demand in March, with the level of new hires declining slightly to 6.74Mn despite the increase in openings. Total separations rose to 6.32Mn, a rise of nearly 4% from February.

(Source: CNBC News)

• The price of a major U.S. junk bond exchange traded fund (ETF) fell to its lowest in over two years this week, as concerns over the impact of a hawkish Federal Reserve on the economy led investors to pull out of riskier assets. BlackRock’s iShares iBoxx $ High Yield Corporate Bond ETF (HYG.P) fell 0.4% to trade $78.23 a share on Monday, Refinitiv data showed - the lowest price since April 2020. 
• Meanwhile the yield spread on the ICE BofA U.S. High Yield Index, a commonly used benchmark for the junk bond market, rose to 405 basis points on Monday from 393 bps last week, widening to its highest since March 15, when the spread hit a 15-month peak at 421 bp. A widening of the spread of junk bond yields over Treasuries is an indication of risk aversion in financial markets. 
• U.S. credit markets saw some respite in March, but the relief proved to be short-lived as uncertainty around the U.S. central bank's ability to engineer a soft landing for the economy continues to weigh on risky assets. 
• The Fed is expected to announce a 50-basis point rate hike this week as well as the launch of quantitative tightening (QT) - the reversal of a bond-buying program aimed at supporting the economy during the pandemic. 
• Concerns over its tightening monetary policies have led to a sell-off in U.S. Treasuries this year which has also weighed on riskier assets such as U.S. corporate bonds.

(Source: Reuters)

• For March 2022, output prices for producers in the Mining and Quarrying industry increased by 0.7%, which was higher than February’s outturn of 0.5%. The movement was mainly attributed to a 0.7% rise in the index for the major group ‘Bauxite Mining & Alumina Processing’. 
• Year-to-date, aluminum prices have increased by 7.4% based on data from Markets Insider. The market has been impacted by the substantial increase in energy and raw material costs, growing demand, decline in China’s production capacity, and fears over supply issues following the sanctions against Russia, which placed upward pressure on prices. 
• The index for the Manufacturing industry also increased by 2.4%. The main contributors to the increase in the index for the Manufacturing industry were the major groups, ‘Refined Petroleum Products’ up by 7.3%, ‘Food, Beverages & Tobacco’ which moved up by 1.4% and ‘Wood and Wood Products and Furniture’ up by 0.9%’. Along with the other industries the manufacturing industry continues to be adversely affected by higher costs for shipping and raw materials on the international market owing to both the lingering effects of the pandemic and the current geopolitical tensions between Russia-Ukraine. 
• These March outturns contributed to a 12-month point-to-point (March 2021 – March 2022) increase in both the Mining & Quarrying and Manufacturing industry indices of 35.9% and 22.0%, respectively. It is anticipated that these indices will rise further in the near term as the Russia-Ukraine conflict and its impact on commodity prices continue to unfold.

(Sources: STATIN & NCBCM Research)

• Caribbean Assurance Brokers Limited (CAB) reported a net profit of JMD $1.81Mn for its first quarter ended March 31, 2022, which represents a significant improvement from the net loss of JMD$7.88Mn in the prior period last year. 
• This performance mainly resulted from a 20.7% and 17.3% increase in revenue and other income. This revenue outturn was mainly attributable to growth in its international insurance division, specifically, its Individual Life Division which saw an increase of 33.0%. Furthermore, the company would have seen a reduction in its finance cost of 27.6% as it paid down its existing mortgage loan. 
• The improvements in income outweighed the 3.7% and 19.4% increase in administrative and selling expenses. The growth in total expenses included professional fees, audit fees, repairs and maintenance, as well as staff-related costs. 
• Going forward, management expects that the company’s performance will improve supported by the economy reverting to some level of normalcy, and its implementation of new sales processes and the addition of new talent in preparation for continued growth in demand. 
• CAB’s stock price has increased by 10.05% since the start of the calendar year. The stock closed Monday’s trading session at $2.50 and currently trades at a P/E of 9.3x which is below the Junior Market Financial Sector Average of 12.3x. 

Sources: JSE & NCBCM Research)

• Fitch maintains their 2022 real GDP growth forecast for Mexico at 1.8%, as Q1 2022 preliminary data showed only a slow recovery from a weak performance in H2 2021.  
• The Q1 2022 data, however; is generally in line with the Agency’s view that the Mexican growth will struggle to gain momentum in 2022, weighed down by high inflation, rising interest rates, and relatively weak investor confidence. As such, inflation is expected to average 7.2% y-o-y in 2022, the highest level since 2000, as higher commodity prices due to the war in Ukraine compound pre-existing price pressures. 
• Further, higher price growth will eat away at household income and reduce consumer confidence. That said, after 250 basis points worth of rate hikes since June 2021, the Banco de México (Banxico) will likely respond with additional monetary tightening, which will weigh on lending. 
• Fitch anticipates investor confidence will remain subdued, given concerns about policy direction under President Andrés Manuel López Obrador (AMLO), compounding the impact of higher borrowing costs on investment. 
• Notably, high inflation and interest rates, weak investor sentiment, and somewhat weaker US demand for exports will cap growth in the quarters ahead. However; a number of factors including strong remittances, the ongoing re-opening from the pandemic, and increased crude exports will prevent a steeper decline in growth.

(Source: Fitch Solutions)

• The Federal Reserve is hiking interest rates in an effort to defuse an explosive year of price inflation, but global forces could neutralize the effects of that tightening of monetary policy, and keep inflation high. 
• Some observers believe the U.S. government may have misread the looming threat of inflation. During the pandemic, Uncle Sam dispersed historic sums of cash to blunt widespread economic damage. Analysts say this stimulus produced strong household savings, and a boom in demand for durable goods followed. This surge in demand came as global supply chains stalled out, and a persistent bout of inflation followed. In March 2022, prices across all categories rose to historic levels, 8.5% year over year. 
• From 1965 to 1982, inflation soared, at times reaching double-digit rates. In 1979, the central bank, under Chair Paul Volcker, kicked off a tightening cycle that resulted in interest rates of nearly 20%. Strong monetary policies killed inflation, but also led companies to offshore labour costs. As a result, American workers saw their labour income stagnate relative to productivity for four decades. 
• This period in U.S. economic history is remembered for stagflation, which describes the dual threat of stagnant growth and persistent inflation. Today’s Federal Reserve leaders hope to avoid such a dramatic turn of events. But their plan could backfire, as many of the root causes of inflation are outside of the bank’s control.

(Source: CNBC News)

• Oil prices reversed course to settle in positive territory on Monday on a rally in the diesel market and fears that supply might be crimped by a potential European Union ban on Russian crude. 
• Brent crude futures gained 44 cents, or 0.4%, to settle at $107.58 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose 48 cents to settle at $105.17 a barrel. 
• Diesel futures continued to rally after rolling over to the June contract on Monday, rising 5% to $4.0172 per gallon as a low supply of inventories globally put pressure on WTI and Brent prices. 
• Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois said that the main item was a further strengthening in the diesel market that acted to pull the rest of the complex higher. 
• Both benchmarks fell by more than $2.00 earlier in the session on news that the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next batch of sanctions on Russia on Tuesday. 
• The EU is leaning toward banning Russian oil imports by the end of the year, according to two EU diplomats, after talks between the European Commission and EU member states over the weekend.

(Source: Reuters)

• Fitch Solutions forecasts that the Bank of Jamaica (BOJ) will raise its benchmark interest rate by an additional 100 basis points (bps) by end-2022, to 5.50%, in response to high inflation. The BOJ has raised the rate by 400bps since October 2021, to 4.50% as of April 2022, in response to mounting inflationary pressures and the beginning of the US Federal Reserve’s (Fed) rate-hiking cycle. 
• After rising to a multi-year high of 11.3% y-o-y in March 2022, Fitch expects that inflation will remain well above the BOJ’s target range of 4.0% to 6.0% in both 2022 and 2023, as the Russian invasion of Ukraine will keep commodity prices elevated into next year. This will in turn prompt the BOJ to make additional hikes in the near term, though it will begin to lower the benchmark rate in 2023 as price growth slows. 
• Fitch expects that Jamaica’s inflation rate will average 11.4% in 2022 and 7.3% in 2023, from 5.8% in 2021, as the Russia-Ukraine war exerts upward pressure on commodity prices.  
• In late 2021, Jamaica was already in the midst of accelerating price growth due to a short-term agricultural shock stemming from tropical storms Grace and Idain August 2021 and high oil prices. Inflation has continued to gain steam in early 2022, rising to 11.3% in March, and will likely climb further in the months ahead as reliance on imports leaves the market exposed to the impacts of higher commodity prices and shipping costs.

(Source: Fitch Solutions)

• A sum of more than US$200Mn is to be spent over the period 2022 to 2025, for capital expenditure programmes at the nation’s international airports and aerodromes, with a figure of US$70Mn slated to be spent this financial year. 
• Minister of Transport and Mining Hon. Audley Shaw made the announcement during his contribution to the 2022/23 Sectoral Debate in the House of Representatives on April 27. 
• The upgrades will include runway expansions which will increase runaways by approximately 400 metres to 3,060 metres, and provide runway end safety areas as mandated by the International Civil Aviation Organization (ICAO). Additionally, it will enable airports such as the Sangster International Airport to accommodate long-haul flights from destinations it cannot now serve, such as East Asia. 
• These planned upgrades provide a potential tailwind for increased overnight tourist arrivals which will ultimately support the recovery of the tourism industry as airports will now have the ability to secure travel routes from previously untapped destinations.

(Sources: JIS News & NCBCM)