LatAm credits rally after Yellen testimony
By Davide Scigliuzzo
NEW YORK, Feb 24 (IFR) - Latin American credits extended gains on Tuesday after Federal Reserve Chief Janet Yellen said the US central bank will consider rate hikes on a "meeting by meeting" basis.
Several market participants interpreted the subtle change in language as an indication that an interest rate increase will come later than expected, triggering a broad-based rally across developed and emerging markets.
"The rally intensified (after Yellen's testimony) as people are pushing back expectations of a hike to the late summer or the early fall, which is constructive for risky assets," said a corporate bond trader in New York.
Among Latin American bonds, names trading on a spread basis were outperforming, seen tightening by as much as 7bp, while higher-yielding credits that trade on a cash basis were simply tracking US Treasuries higher.
Bonds issued by Brazilian state-owned oil company Petrobras held up to their intra-day tights. The company's 2021s, among the most traded securities of the day, closed at a spread of 577bp-567bp, or 7bp tighter.
After releasing better-than-expected earnings, Mexican corporates such as Grupo Alfa and Grupo Cementos de Chihuahua (GCC) saw their bonds jump three quarters of a point.
Alfa's 5.25% 2024s, for example, ended the day quoted at 105.75-106.75, while GCC's 8.125% 2020s were spotted at 107.75-108-75.
"Alfa's losses on its stake in Pacific Rubiales and the peso depreciation were well offset by strength in (its) Nemak and Sigma (divisions)," said the trader. Continuación...