Weekly News & Views

CSN, YPF

Jun 16, 2025

Market Snapshot

The LatAm Aggregate Index contracted by 3 bps to 303 bps in the week ending Friday, June 13, 2025, and is now trading 35 bps below its 3-month average of 338 bps. The broader Emerging Market Index expanded 3 bps to 191 bps, reflecting a 17 bps contraction from its 3-month average of 208 bps. Meanwhile, the U.S. Aggregate Index increased by 2 bps to 122 bps and is now 16 bps below its 3-month average of 138 bps. Notably, the EM CCC Index contracted 10 bps and is now trading 131 bps below its 3-month average of 817 bps, while the US CCC Index expanded 16 bps and is now at 720 bps, which is 16 bps above its 3-month average of 704 bps.

Equity markets in the region posted mixed performances. Argentina’s Merval Index fell 1.4%, Brazil’s Ibovespa Index increased 0.8%, while Mexico’s Mexbol Index declined 1.1%. In the U.S., the S&P 500 Index fell 0.4% for the week.

In commodities, WTI crude oil traded at $73.9/b, up 14.5% on the week, while Brent crude settled at $75.0/b, up 12.8% over the same period.

Turning to bond yields, U.S. Treasuries saw declines across the curve. The 10-year yield decreased 9 bps to 4.42%, while the 5-year yield fell 10 bps to 4.02%. In Latin America, the yield on the 10-year Mexican government bond contracted 19 bps to 6.12%, the 10-year Brazilian government bond decreased 6 bps to 6.71%, while the 10-year Argentine government bond widened 8 bps to 10.95%.

Weekly News

Initiating Coverage on CSN: Overweight on Risk-Reward

On June 13, 2025, we initiated coverage on CSN.

We are initiating coverage on CSN with an Overweight recommendation, highlighting the CSN 6.750% 2028 and 4.625% 2031 bonds as attractive across the curve, given their elevated yields of 8.8% and 9.2%, respectively, and their significant spread over the EM BB and LatAm BB curves.

CSN benefits from a vertically integrated and diversified business model across steel, mining, cement, energy, and logistics, which provides cost advantages, revenue stability, and operational synergies. Its strong domestic position in steel and cement is supported by scale, brand recognition, and efficient logistics. While exports contribute about 42% of revenue and offer FX diversification, CSN remains heavily exposed to Brazil’s macroeconomic, fiscal, and regulatory risks. The pending tax reform (Constitutional Amendment 132) could alter its cost structure, adding uncertainty to its domestic outlook. The credit story is constrained by high leverage and a significant interest burden. CSN is also exposed to commodity cycles, particularly fluctuations in iron ore and steel prices, a disruptive increase in Chinese exports, and a capital-intensive growth plan that limits financial flexibility. These pressures are somewhat mitigated by CSN’s strong liquidity position, which could be further supported by asset sales and, if necessary, a degree of flexibility to defer growth capital expenditures.

YPF and Eni Advance Argentina LNG Project with New Agreement Signed in Rome

On June 6, 2025, YPF and Italy’s Eni have signed a new agreement to advance the Argentina LNG project, marking a critical step toward the final investment decision (FID) for one of its key phases. The agreement was signed in Rome by YPF President and CEO Horacio Marín and Eni CEO Claudio Descalzi. “We are making very rapid progress with Eni. We are confident that before the end of the year we will be able to reach the final investment decision and realize this phase of this project, which is key to our country’s energy future,” stated Marín. This phase of the Argentina LNG project includes the development of infrastructure for gas production, treatment, transportation, and liquefaction via floating units, targeting a total capacity of 12 million tons of LNG per year.

The agreement outlines the concrete steps necessary to reach FID, reinforcing the momentum behind Argentina’s ambition to leverage its vast Vaca Muerta shale gas reserves. Through this initiative, YPF aims to position Argentina as a reliable long-term supplier of liquefied natural gas on the global stage. This latest development underscores YPF’s continued commitment to monetizing its unconventional gas resources and transforming Argentina into a competitive energy exporter.

EM Spreads’ take: We see this agreement as a positive credit development for YPF. The partnership with Eni adds credibility and technical strength to the Argentina LNG project. If successful, this phase could unlock material export revenues, support FX inflows, and improve long-term visibility for Argentina’s energy sector. For YPF, execution remains key, but this milestone reinforces the strategic value of its assets and long-term monetization prospects.

Disclaimer

Opinions presented in this report are based on and derived primarily from public information that EM Spreads LLC ("EM Spreads," "We," or "Our") considers reliable. Still, we make no representations or warranty regarding their accuracy or completeness. EM Spreads accepts no liability arising from this report. No warranty, express or implied, as to the accuracy, timeliness, completeness, or fitness for any particular purpose of any such analysis or other opinion or information is given or made by EM Spreads in any form.

All information contained in this document is protected by Copyright law, and none of such information may be copied, repackaged, transferred, redistributed, resold, or stored for subsequent use for any such purpose, in whole or in part, by any person without EM Spreads’ prior written consent. All rights reserved. Reproduction of this report, even for internal distribution, is strictly prohibited. The content shall not be used for any unlawful or unauthorized purposes.

This content is provided on an "as is" basis and should not be regarded as a substitute for obtaining independent advice. EM Spreads disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use, freedom from bugs, software errors, or defects, that the content’s functioning will be uninterrupted or that the content will operate with any software or hardware configuration. Investors must determine the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy, and their legal, fiscal, and financial position. As this document is for information purposes only and does not constitute or qualify as an investment recommendation or advice or as a direct investment recommendation or advice, neither this document nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter, any contract or commitment whatsoever. Nothing in this report constitutes investment, legal, accounting, or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise a personal recommendation to you.

The opinion contained in this report may not be suitable for your specific situation. Investors are urged to contact their investment advisors for individual explanations and advice. EM Spreads does not offer advice on the tax consequences of investments, and investors are urged to contact an independent tax adviser for individual explanations and advice. In no event shall EM Spreads be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special, or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of this report.

This document may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. EM Spreads undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document or to discontinue it altogether without notice. EM Spreads reserves the right to modify the views expressed herein without notice.

The content in this report is provided to you for information purposes only. EM Spreads’ opinions and analysis are not recommendations to purchase, hold, or sell any securities or to make any investment decisions and do not address the suitability of any security. EM Spreads assumes no obligation to update the content following publication in any form or format. The content in the report shall not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and /or clients when making investment and other business decisions. EM Spreads has not taken steps to ensure that the securities referred to in this report are suitable for any investor.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability, or use would be contrary to law or regulation or which would subject EM Spreads to any registration or licensing requirement within such jurisdiction. No person should review or rely on this report if such review or reliance would require EM Spreads to obtain any registration or license in any such jurisdiction.

All estimates and opinions expressed in this report reflect the analysts' independent judgment as of the issue's date about the subject company or companies and its or their securities. No part of the analyst's compensation was, is, or will be directly or indirectly related to this report's specific recommendations or views. The research analysts contributing to the report may not be registered /qualified as research analysts with any regulatory or government body or market regulator.

EM Spreads