LATAM WRAP-S&P's negative outlook puts pressure on Brazil
By Paul Kilby
NEW YORK, July 28 (IFR) - S&P's decision to put Brazil's BBB- rating on negative outlook cast a shadow over what had been a positive Tuesday in the LatAm credit markets.
Brazilian bond prices dipped after S&P raised the possibility of demoting the country's credit standing to junk, though overall the response was relatively muted.
Brazil 2025s were down about 30 cents in early afternoon to trade at around 93.00, while the country's five-year CDS was back at around 300bp-302bp after opening around 291bp.
"It was a mild reaction," said Siobhan Morden, head of Latin America strategy at Jefferies.
"But (S&P's move) was earlier than expected, and it increases the risk of a downgrade coming sooner."
This follows a dramatic dip in prices last week, when the government announced it could not meet primary surplus targets for the year.
That in turn raised concerns that Moody's would downgrade the sovereign to Baa3 from Baa2 with a negative outlook to perch it just above junk.
"It wouldn't be a surprise if Moody's came with a downgrade and a negative outlook (as well) as it would be in line with S&P," said Klaus Spielkamp, head of fixed-income sales at Bulltick. Continuación...