Fed Holds Interest Rates Steady, Citing Stubborn Inflation

The United States, Denmark, and Greenland have initiated a formal process to resolve the ongoing standoff over the semi-autonomous territory, U.S. Secretary of State Marco Rubio announced on Wednesday.

Speaking to the Senate Foreign Relations Committee, Rubio confirmed that representatives from all three parties are now engaged in technical-level meetings. He expressed optimism about the negotiations, stating, "We're in a good place right now," and anticipates the process will lead to a "good outcome for everybody."

U.S. Secretary of State Marco Rubio addresses the Senate Foreign Relations Committee regarding policy on Greenland.

Negotiations Structured for Privacy and Progress

While details about the participants and location were not disclosed, Rubio explained that the talks are intentionally structured to avoid a "media circus" around each meeting. This approach is designed to provide greater flexibility as the parties work toward a solution.

"I think we're going to get there," Rubio told the committee during the public session.

A Shift from Trump's Earlier Stance

The diplomatic effort marks a significant shift from President Donald Trump's aggressive push earlier in the year for the U.S. to acquire Greenland from Denmark. That move raised the unusual prospect of the United States confronting a NATO ally over territory.

Rubio described as "important" President Trump's recent statement at the World Economic Forum in Davos, where he declared he was no longer pursuing a military solution to the crisis. In Davos, Trump also mentioned that a "framework of a future deal with respect to Greenland" had been reached, though the specifics of that framework have not been made public.

Denmark Acknowledges Talks Amid Disagreement

Danish officials have also confirmed the establishment of a dialogue. Last week, Danish Foreign Minister Lars Løkke Rasmussen announced that a "high-level working group" was being formed between the U.S., Denmark, and Greenland.

However, Rasmussen also cautioned that "fundamental disagreement" with Washington persists, signaling that the path to a final resolution may be complex.

Treasury Secretary Scott Bessent confirmed Wednesday that President Donald Trump is still considering four "great" candidates to succeed Jerome Powell as the next Chairman of the Federal Reserve.

The confirmation followed an extended discussion on the matter between Bessent and Trump during a flight from Iowa back to Washington.

The Selection Process Nears its Conclusion

Speaking to CNBC, Bessent described a detailed, two-hour conversation with the president about the central bank's leadership. He clarified his advisory role, stating, "I don't make recommendations. I give the president options and outcomes. It's going to be the president's decision."

The timeline for an official announcement remains unclear. When asked about the timing, Bessent noted, "Only the president knows." The White House did not provide an immediate comment on when a decision might be made.

This follows earlier remarks from Trump, who said he was "down to one in my mind," suggesting a decision was imminent.

Who Are the Top Contenders for Fed Chair?

While Bessent did not name the four individuals, several candidates have been identified in recent weeks. According to the prediction market Kalshi, Rick Rieder, BlackRock’s chief bond investment manager, is the clear favorite to succeed Powell when his term ends in May. Trump previously described Rieder's interview as "very impressive."

Other potential nominees mentioned by Trump and his aides include:

• Christopher Waller, a current Fed Governor.

• Kevin Warsh, a former Fed Governor.

• Kevin Hassett, Trump's top economic adviser, although the president has also expressed a desire to keep him in his current role.

Bessent Weighs In on Inflation and Interest Rates

Beyond the nomination process, Bessent offered his perspective on monetary policy, urging the Federal Reserve to maintain an "open mind" regarding interest rates. He suggested that many on the board hold "a false narrative" about inflation.

"I hope that they will have an open mind and see what's coming over the next couple months," he said.

Bessent argued that strong U.S. economic growth and rising wages do not automatically guarantee higher inflation, especially given counteracting forces like substantial decreases in rents.

Interim Board Stability

Bessent also noted that Stephen Miran could continue serving on the Fed's Board of Governors for now. Miran, who is on leave from his position as chairman of the White House Council of Economic Advisers, joined the board in September to complete the 14-year term of Adriana Kugler, who resigned.

Miran has indicated he will likely remain on the board until the Senate confirms Trump's nominee for the next Fed chair, providing stability during the transition.

Brazil's Treasury has set a target for federal public debt to close the year between 9.7 trillion and 10.3 trillion reais ($1.86 to $1.98 trillion). This projection signals a potential increase of up to 19% from the 8.635 trillion reais recorded in 2025.

The forecast marks another year of double-digit expansion for the public debt of Latin America's largest economy, following an 18% increase last year.

Treasury Outlines New Financing Strategy

In its Annual Financing Plan, the Treasury detailed a strategy for a "more frequent market presence." The plan involves consistent U.S. dollar bond issuances and an openness to other currencies, including the euro and yuan, to diversify Brazil's financing sources.

A central objective is to gradually refine the public debt's composition. The Treasury aims to achieve this by increasing the share of fixed-rate bonds and extending the maturities of its debt instruments.

A Closer Look at the Debt Mix

According to its new guidelines, fixed-rate bonds are projected to represent 21% to 25% of the total debt by year-end, a shift from 22% in 2025.

Meanwhile, debt linked to the benchmark Selic interest rate is estimated to account for 46% to 50% of the total, after rising to 48.3% last year. These floating-rate bonds, known as LFTs, tend to be more attractive to investors during periods of elevated risk aversion. However, they also expose public debt servicing costs to sharp increases when interest rates climb.

Macro Headwinds: Interest Rates and Politics

Many market participants expect volatility to intensify this year due to Brazil's upcoming general election in October.

The nation's benchmark Selic rate currently stands at 15%, a near 20-year high, where it has remained since July. The central bank is holding rates firm to bring inflation back to its 3% target. This comes as the economy has been slow to show clear signs of cooling amid government stimulus under President Luiz Inacio Lula da Silva.

The sharp monetary tightening last year, which saw the Selic rise from 12.25%, was a primary driver of the increase in public debt. Policymakers are set to announce their next monetary policy decision late on Wednesday, with markets widely expecting another hold.

($1 = 5.2074 reais)

Source: Reuters

Ecuador just made a stunning return to global credit markets, and investors are betting Argentina could be next. In its first major bond sale since a 2020 debt restructuring, Ecuador successfully sold $4 billion in bonds—its largest global offering ever.

The deal attracted so much demand that the South American nation secured its lowest borrowing costs in years. The positive momentum was reinforced when Moody's Ratings upgraded the country's credit score, causing yields to compress even further.

This successful issuance is more than just a win for Ecuador, which plans to use the funds to repay existing debt. It’s a clear signal of strong investor appetite for high-yield emerging-market credits and raises hopes for Argentina, which has also been locked out of global markets since its own 2020 restructuring.

"Ecuador's debt issuance this week shows that even countries with a long history of defaults, high political risk and scarce reserves can access international markets at single-digit yields," noted Diego Chameides, chief economist at Banco Galicia, one of Argentina's largest lenders. "It appears the window for Argentina's market access could open up, which is key to dealing with large debt maturities in the coming years."

Reflecting this optimism, Argentine bonds rallied alongside Ecuadorian debt, and a key measure of the country's risk has fallen below 500 basis points—a level officials previously identified as compatible with a market return.

Parallels Between Two Economies

Despite Argentina's economy being roughly four times larger than Ecuador's, the two nations share several key financial characteristics.

• History of Defaults: Both have restructured their debt multiple times. Since the early 1800s, Argentina has defaulted nine times and Ecuador ten.

• IMF Programs: Both countries remain under International Monetary Fund programs.

• Weak Reserves: Both face chronically weak foreign-reserve positions, a major concern for debt investors.

However, their prospects are improving under new administrations focused on fiscal consolidation. In Ecuador, President Daniel Noboa cut a diesel subsidy while containing the resulting social unrest. In Argentina, President Javier Milei has eased investor concerns by loosening currency restrictions and rebuilding foreign reserves since his victory in October's midterm elections.

A Potential Playbook for Argentina

For many analysts, Ecuador’s strategy of using the new issuance to buy back debt and reduce near-term maturities could serve as a direct template for Argentina.

"Ecuador's latest transaction is a clean read-through for how Argentina's curve could react to a well-designed liability management deal," said Mauro Favini, a senior portfolio manager at Vanguard. "Argentina is clearly improving, but until it extends its debt stack through a transaction akin to Ecuador's, the market will struggle to take the curve meaningfully tighter."

Argentina has been considering a return to markets ever since Milei's election win pushed yield spreads toward the 550 basis-point range. While corporate and provincial entities have successfully issued debt, the sovereign has held back, using a repurchase agreement with banks to handle January payments.

Rebuilding Reserves Before a Return

A top priority for Argentina is rebuilding its depleted foreign reserves. The central bank has been actively buying U.S. dollars, but may want to demonstrate more substantial progress before tapping the markets.

"Our impression is that they want to show several billion in FX purchases before going to market, as they are very focused on bringing down country risk before launching the deal," explained Walter Stoeppelwerth, chief investment officer at Grit Capital Group. "But it's not as simple as Ecuador. Argentina's swap could be gigantic in comparison."

Argentine officials have tried to manage expectations. Economy Minister Luis Caputo has stated a desire to reduce the nation's reliance on Wall Street, and President Milei recently said, "the only thing we would go to international markets for would be rollover." This marks a sharp contrast to the 2016-2018 period under former President Mauricio Macri, when broad market access fueled a debt boom that ultimately collapsed.

The Urgency of Looming Maturities

Despite the cautious rhetoric, Argentina has limited time to wait. According to calculations by Galicia, foreign-currency debt payments for 2026 and 2027 total nearly $43 billion, making a return to market financing critical.

With yields on its 2035 global bonds near 9.1%, Argentina remains one of the few large emerging-market credits offering such attractive returns. As sovereign bond risk in the developing world hits a 13-year low, the pool of high-yielding assets is shrinking, driving more demand toward riskier debt.

Investors argue that this combination of factors should push Argentina to act sooner rather than later.

"To push the curve toward true normalization and lower long-term funding costs, Argentina will need an Ecuador-style, proactive liability management strategy," Favini concluded. "Even after covering its 2026 liquidity needs via the repo, Argentina still needs to use the current market window."

With the indictment of Venezuela’s President Nicolás Maduro, the global energy market is now focused on a critical question: can the nation's collapsed oil industry be rebuilt? The path to restoring Venezuela's crude production to its former glory is long, complicated, and paved with skepticism from the very companies needed to make it happen.

The conversation has shifted toward a potential U.S.-led effort to bring major oil companies back to the politically volatile nation, which nationalized many of their assets in 2007. However, reviving an industry battered by decades of decline is a monumental task.

Venezuela's oil infrastructure, like this PDVSA facility, requires massive investment to overcome years of neglect and restore production.

From Superpower to Collapse: A Production Timeline

Venezuela currently produces an average of 800,000 barrels of crude oil per day (bpd), a fraction of its peak output of 3.5 million bpd in the 1990s. The decline accelerated sharply after the 2007 expropriation of U.S. oil assets.

The industry was further damaged by the 2014-2016 global oil price crash, which saw crude prices fall by up to 70%. Even as prices stabilized, Venezuela’s production failed to recover and was hit again by the pandemic-induced price slump in 2020. Recent years have seen a slight recovery, but the numbers remain bleak.

The Trillion-Dollar Potential in Untapped Reserves

While current production is low, Venezuela's untapped potential is enormous. Research firm Wood Mackenzie estimates the country holds at least 241 billion barrels of recoverable crude oil. Analysts at Bernstein suggest the figure could be as high as 300 billion barrels of proven reserves, placing it among the largest in the world.

In a recent note, Bernstein declared, "Venezuela has the potential to be an oil superpower." But turning those vast underground reserves into actual production is where the real challenge lies.

Wall Street's Skepticism: "Above-Surface" Hurdles

Despite the immense reserves, Wall Street remains deeply skeptical about any near-term production boom. Bernstein analysts point out that the issue has never been the oil in the ground but the "above-surface constraints."

Their research highlights the core problems: "Since the 2006/07 nationalization of western oil company interests by Hugo Chavez, lack of investment, mismanagement, neglect, have driven an oil production decline of 70% to just 1% of current global output."

U.S. oil majors share this caution. Burned by the last decade's price crash, Western energy companies are now focused on capital discipline and efficient cash flow. The specific risk of being "twice bitten by Venezuelan nationalization," as Bernstein puts it, makes them "exceptionally cautious about committing fresh capital quickly."

This sentiment was voiced directly by Exxon Mobil CEO Darren Woods at a White House meeting. After President Trump suggested U.S. oil companies would spend $100 billion in the country, Woods told him the Venezuelan market is "uninvestable" in its current state.

Chevron's Unique Foothold in a Risky Market

Chevron stands as a notable exception. As the only major U.S. oil company still operating in Venezuela, it holds a significant advantage. The company, which has been in the country since 1923, maintains a joint venture with the national oil company PDVSA that currently produces about 240,000 bpd.

At the same White House meeting, Chevron CEO Mike Wirth stated the company could increase its production by about 50% "within our own disciplined investment schemes" in the next 18 to 24 months.

Dueling Priorities and Market Realities

The Trump administration has signaled that new production is a higher priority than reclaiming nationalized assets. This comes as Chinese and Russian state-controlled oil companies hold rights to millions of barrels in Venezuela—up to 6.5 million, according to research from Wood Mackenzie and Morgan Stanley.

Meanwhile, the U.S. refining system is well-positioned to process Venezuelan crude. "In the absence of sanctions or other disruptions, U.S. Gulf Coast refiners are the natural destination of Venezuela's crude," Bernstein wrote. This has already benefited some investors and refiners like Valero Energy, which was among the first to purchase Venezuelan oil recently. U.S. Energy Secretary Chris Wright noted that the U.S. has received 30% higher prices for Venezuelan crude in its first sales since the military action, with Trump stating Venezuela will turn over 30 to 50 million barrels of sanctioned oil to be sold at market prices.

The Long Road to Recovery: Analyst Forecasts

Analysts are divided on how quickly Venezuela can ramp up its output, with most agreeing that significant progress will take years and substantial capital.

• BMO Capital Markets: Expects little change in export levels in the near term but sees potential for higher production in 3-5 years if U.S. majors return.

• Wolfe Research: Believes production could rise to around 1 million bpd over the next few years with basic maintenance.

• JPMorgan Chase: Estimates that with political stability and new licensing, production could reach 1.2 million bpd within months and 1.4 million bpd in two years. Over the next decade, output could potentially hit 2.5 million bpd.

• Goldman Sachs: Daan Struyven, co-head of commodities research, projected on a recent podcast that production could rise by 50% by 2030 and potentially double with substantial investment from U.S. producers.

The Bottom Line: Billions in Investment Required

Ultimately, rebuilding Venezuela's oil industry hinges on massive, sustained investment. Analysts at Wood Mackenzie and Morgan Stanley note that while well workovers could boost production to the 2 million bpd range within two years, going beyond that requires serious capital.

The consensus is that a significant revival will be expensive:

• $15 billion to $20 billion: This investment over a decade could raise output to 1.5 million bpd, according to estimates from David Oxley at Capital Economics and analysis from Wood Mackenzie.

• $180 billion: To restore production to over 3 million bpd, Oxley estimates a staggering $180 billion would be needed over the next 15 years.

For now, the risks remain high, and any production upside depends entirely on government stability, sanctions policy, and favorable fiscal terms—not just the oil in the ground.