LATAM WRAP-LatAm credits move wider on China selloff
By Paul Kilby
NEW YORK, July 27 (IFR) - Latin American credit markets came close to a virtual standstill on Monday after an overnight rout in Chinese stocks.
Most credits were off intra-day wides, but still weak as Brazilian credit woes, sinking commodity prices and weaker FX gave both investors and borrowers pause.
"Investors see value in the market, but have no reason to go rushing in as we haven't reached the bottom yet," said a syndicate manager summing up the standoff in the primary markets. "And borrowers aren't willing to pay these levels."
Some bankers now think primary issuance activity may not pick up until September as slowing Chinese growth has only added to the malaise affecting LatAm credits following a sharp sell-off in Brazil last week.
The capital markets have shut again for Brazilian issuers amid further uncertainty about the country's economy and whether or not Moody's will assign a negative outlook following a possible downgrade.
Spreads on benchmark names continued to inch wider on Monday with Petrobras 2024s quoted as wide as 508bp, considerably weaker than the 490bp-480bp quoted on Friday.
Meanwhile, the sovereign's benchmark 2025s were largely flat on a price basis at 93 bid after falling earlier to high 92s.
"The other shoe to drop (in Brazil) could be a downgrade and that may create an entry point," said Jorge Piedrahita, CEO of broker Torino Capital. Continuación...