Colombia EMBI directed graphs

Monthly — is the current spread priced?

rich

Colombia EMBI looks rich at 217 bp vs fair 254 bp (-37 bp tight).

The EMBI tightened 56 bp over the last 6 months (282 → 226 bp). Last month it widened another 37 bp. Last month’s move was led by US high-yield spreads (+27 bp, wider); USD broad (+7 bp, wider). It looks rich because the market print (217 bp) is tighter than macro fair value (254 bp, gap -37 bp).

Fed funds increased, which put upward pressure on the local policy rate, which typically widens the EMBI spread. That does not appear to have been incorporated into the current spread.
USD broad increased, which put upward pressure on the local exchange rate, which typically widens the EMBI spread. That does not appear to have been incorporated into the current spread.
US 10Y yields increased, which put upward pressure on the local policy rate, which typically widens the EMBI spread. That does not appear to have been incorporated into the current spread.

Current EMBI	217 bp (2026-10-15)
Macro fair value	254 bp (month-end 2026-09-30)
Rich / cheap	rich
Gap (current − fair)	-37 bp (-1.477σ)
Month-end residual	-27 bp
Residual σ	25 bp
In-sample R²	0.841

4 monthly print(s) may not yet have been tradable at the last EMBI date.

Parent	Δ last month	Contrib bp	Typical print lag (d)
us_hy_oas (t)	0.490	+27.2	0
dxy (t)	2.401	+7.1	0
tot_gap (t)	0.000	+0.1	45
tot (t)	0.000	+0.0	45
debt_gap (t)	0.000	+0.0	35
current_account (t)	0.000	+0.0	25

Has EMBI had time to trade the prints?

Input	Est. release	Traded after print?	Days since
us_hy_oas	2026-09-30	yes	15
tot	2026-11-14	pending	-30
tot_gap	2026-11-14	pending	-30
dxy	2026-09-30	yes	15
debt_gap	2026-11-04	pending	-20
current_account	2026-10-25	pending	-10

Monthly DAG

Narrative edges (strongest first)

From		To	Lag	β (z)	Child R²
public_debt_gdp	→	debt_gap	t	+1.000	0.242
nominal_deficit	→	primary_balance	t	+0.961	0.828
dxy	→	fx	t	+0.942	-1.222
oil	→	tot	t	+0.942	-1495.523
fx	→	reer	t	-0.931	-20.065
reserves	→	fx	t	+0.893	-1.222
dxy	→	reer	t	-0.888	-20.065
policy_rate	→	policy_fed_gap	t	+0.882	-5.442
fed_funds	→	policy_rate	t	+0.865	0.817
nominal_deficit	→	public_debt_gdp	t	-0.846	-12.770
cpi	→	policy_rate	t	+0.834	0.817
fx	→	embi_bra	t	+0.825	-3.083
cpi	→	policy_fed_gap	t	+0.802	-5.442
copper	→	tot_gap	t	+0.776	-51.057
reer	→	embi_bra	t	-0.769	-3.083
dxy	→	embi_bra	t	+0.734	-3.083
primary_balance	→	debt_gap	t	-0.713	0.242
primary_balance	→	public_debt_gdp	t	-0.713	-12.770
ust_short	→	policy_rate	t	+0.686	0.817
copper	→	tot	t	+0.682	-1495.523
cpi	→	fx	t	+0.664	-1.222
oil	→	tot_gap	t	+0.617	-51.057
debt_gap	→	embi_bra	t	+0.596	-3.083
public_debt_gdp	→	embi_bra	t	+0.596	-3.083
tot	→	exports_growth	t	+0.588	-2.530
us_hy_oas	→	fx	t	-0.569	-1.222
policy_rate	→	embi_bra	t	+0.562	-3.083
copper	→	exports_growth	t	+0.561	-2.530
tot	→	reer_gap	t	+0.548	-0.083
fx	→	policy_rate	t	+0.546	0.817
sp500	→	policy_rate	t	+0.540	0.817
dxy	→	policy_rate	t	+0.534	0.817
tot	→	reer	t	+0.532	-20.065
fed_funds	→	policy_fed_gap	t	+0.526	-5.442
oil	→	reer	t	+0.517	-20.065
tot_gap	→	current_account	t	+0.514	-0.704
reer	→	reer_gap	t	+0.509	-0.083
oil	→	exports_growth	t	+0.507	-2.530
policy_fed_gap	→	embi_bra	t	+0.485	-3.083
ust_short	→	policy_fed_gap	t	+0.473	-5.442
reserves_growth	→	embi_bra	t	-0.470	-3.083
us_hy_oas	→	reer	t	+0.469	-20.065
tot	→	current_account	t	+0.447	-0.704
tot	→	reserves	t	-0.413	-23.798
exports_growth	→	current_account	t	+0.406	-0.704
reserves	→	reserves_growth	t	-0.406	-0.030
tot_gap	→	primary_balance	t	-0.398	0.828
tot_gap	→	fx	t	+0.390	-1.222
oil	→	fx	t	-0.369	-1.222
tot	→	fx	t	-0.367	-1.222
us_hy_oas	→	policy_rate	t	-0.364	0.817
oil	→	reserves	t	-0.343	-23.798
reer	→	policy_rate	t	-0.337	0.817
vix	→	embi_bra	t	+0.323	-3.083
primary_balance	→	policy_rate	t	+0.311	0.817
dxy	→	policy_fed_gap	t	+0.305	-5.442
fx	→	policy_fed_gap	t	+0.304	-5.442
reer_gap	→	policy_rate	t	+0.298	0.817
current_account	→	embi_bra	t	-0.283	-3.083
us_hy_oas	→	reer_gap	t	-0.275	-0.083

ΔEMBI engine (holdout score)

Ridge on ΔEMBI: 1 risk (HY or VIX or S&P) + 1 rates/USD + 1 commodity + 1 local + 1 stock. Ranked by holdout R², not quintile lift. Best: theory|lags=[0, 1] · parents: vix, dxy, oil, fx, public_debt_gdp · 182 train / 20 test through 2026-10-31.

From		To	Lag	β (z)	Child R²
vix	→	embi_bra	t	+0.282	0.562
dxy	→	embi_bra	t	+0.239	0.562
vix	→	embi_bra	t−1	+0.178	0.562
fx	→	embi_bra	t	+0.146	0.562
fx	→	embi_bra	t−1	+0.077	0.562
oil	→	embi_bra	t	-0.055	0.562
dxy	→	embi_bra	t−1	-0.054	0.562
oil	→	embi_bra	t−1	-0.014	0.562
public_debt_gdp	→	embi_bra	t−1	-0.000	0.562
public_debt_gdp	→	embi_bra	t	+0.000	0.562

Method	Lags	OOS R²	σ-quintile	Lift vs naive	Naive middle	±1 bin	3-class	Sign	RMSE Δ	Edges	Parents
theory\|lags=[0, 1] ← best	[0, 1]	0.004	15.0%	-0.200	35.0%	85.0%	25.0%	55.0%	0.266	20	10
pc\|lags=[0, 1]	[0, 1]	0.004	15.0%	-0.200	35.0%	85.0%	25.0%	55.0%	0.266	44	10
pc_strict\|lags=[0, 1]	[0, 1]	0.004	15.0%	-0.200	35.0%	85.0%	25.0%	55.0%	0.266	36	10
tan\|lags=[0, 1]	[0, 1]	0.004	15.0%	-0.200	35.0%	85.0%	25.0%	55.0%	0.266	13	10
hybrid\|lags=[0, 1]	[0, 1]	0.004	15.0%	-0.200	35.0%	85.0%	25.0%	55.0%	0.266	37	10
theory\|lags=[0]	[0]	-0.009	35.0%	0.000	35.0%	90.0%	50.0%	55.0%	0.268	20	5
pc\|lags=[0]	[0]	-0.009	35.0%	0.000	35.0%	90.0%	50.0%	55.0%	0.268	44	5
pc_strict\|lags=[0]	[0]	-0.009	35.0%	0.000	35.0%	90.0%	50.0%	55.0%	0.268	36	5
tan\|lags=[0]	[0]	-0.009	35.0%	0.000	35.0%	90.0%	50.0%	55.0%	0.268	13	5
hybrid\|lags=[0]	[0]	-0.009	35.0%	0.000	35.0%	90.0%	50.0%	55.0%	0.268	37	5
theory\|lags=[0, 1, 2]	[0, 1, 2]	-0.028	15.0%	-0.200	35.0%	85.0%	25.0%	50.0%	0.271	20	15
pc\|lags=[0, 1, 2]	[0, 1, 2]	-0.028	15.0%	-0.200	35.0%	85.0%	25.0%	50.0%	0.271	44	15
pc_strict\|lags=[0, 1, 2]	[0, 1, 2]	-0.028	15.0%	-0.200	35.0%	85.0%	25.0%	50.0%	0.271	36	15
tan\|lags=[0, 1, 2]	[0, 1, 2]	-0.028	15.0%	-0.200	35.0%	85.0%	25.0%	50.0%	0.271	13	15