LATAM WRAP-Brazil underperforms on wider budget deficit
By Davide Scigliuzzo
NEW YORK, July 31 (IFR) - More negative news out of Brazil on Friday, this time in the form of a bigger-than-expected budget deficit in June, ensured the region's credits were ending the week slightly wider in secondary markets.
Brazil's primary budget deficit of R$9.323bn for June came in well below analyst expectations of R$2bn, pushing the real close to recent lows against the dollar even as most Latin American currencies strengthened against the greenback on Friday.
The news, that followed S&P's move earlier in the week to put the country's rating on negative outlook, pushed Petrobras's 2024s about 5bp wider at a spread of 505bp-500bp, according to a corporate bond trader in New York.
The primary market was more active than usual with Cable & Wireless unit Sable International raising US$750m through a seven-year bond. The bond priced at a final yield of 7.125% - 12.5bp tight to price talk of 7.25% but still wider than early indications of mid 6%s.
Bankers covering the region said conditions were constructive for new bond sales, but they are not expecting a lot of supply in the next few weeks.
Brazilian conglomerate Cosan is yet to make a move on a potential bond sale after completing investor meetings last week, but insurance company Sagicor Financial could emerge early next week with its US dollar bond issue.
Sagicor, which has operations in the Caribbean and the US, is looking to raise up to US$320m through a bullet bond, which will refinance some US$300m in debt maturing in 2016, according to an investor presentation seen by IFR.
The company derives nearly half of its premium revenue from Jamaica, Barbados and Trinidad.
Outflows from dedicated emerging markets bond funds intensified in the week ended July 29, with nearly US$394m leaving the asset class, according to EPFR data quoted by UniCredit.
"Risk appetite for emerging markets remains fragile given global rate risks, although yields are becoming more attractive, particularly in LatAm," UniCredit analyst Martin Rea said in a note to clients on Friday. (Reporting by Davide Scigliuzzo; editing by Shankar Ramakrishnan)
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