LATAM WRAP-Brazil credit off lows in illiquid market
By Paul Kilby
NEW YORK, Aug 7 (IFR) - Brazil debt prices were off their lows Friday after a dramatic sell-off in the previous session, but traders see little upside after a tough week for the region's largest economy.
Bonds issued by Petrobras - the oil company at the center of a high-profile corruption scandal - continued to struggle following the release of weak 2Q results late Wednesday.
The company reported a dramatic drop in profits for the quarter to R$532m from R$4.96bn a year ago as new management looks to clean up the balance sheet distorted by alleged corruption practices.
The Petrobras board authorized the spin-off of its fuel distribution unit earlier this week as it seeks ways to control a growing debt burden.
Proceeds from the IPO of a company valued at around US$10bn would go to the parent and not BR Distribuidora, according to Reuters.
The Petrobras 2024s were being quoted some 8bp wider on the day at 568bp-561bp, underperforming sovereign debt that was off its lows for the day.
Brazil's benchmark 2025s were spotted at around 92.875 after opening around 91.25, while five-year CDS was trading at around 334bp after hitting as high as 340bp, according to one trader.
Brazilian bond prices have suffered a volatile week after many investors threw in the towel on a sovereign expected to be demoted to junk over the next year. Continuación...