LATAM WRAP-LatAm credits recoup some losses
By Paul Kilby
NEW YORK, Aug 25 (IFR) - LatAm debt markets recouped some losses on Tuesday as spreads tightened following China's rate cuts, though traders saw little immediate upside for the commodity-reliant region.
"We have hit the tights of the day, but I don't see us rallying any more," said a New York-based trader. "We are not seeing any follow-through. It is not as if people are gung-ho."
Even though oil and metal prices staged a modest rebound, Latin America remains vulnerable as investors assess values in light of a possible hard landing in China.
"We are oversold if this is not the beginning of a bigger crisis in China," said Siobhan Morden, head of Latin America strategy at Jefferies.
The benchmark 2024s of Brazilian oil company Petrobras tightened to 625bp-615bp before settling at around 630bp-620bp on Tuesday after reaching 680bp-655bp in the previous session.
"Investors are trying to figure out what sub-US$40 a barrel means - and which credits are of most concern," one syndicate banker told IFR. "Colombia is probably number one."
Though Colombia's 2024s tightened about 8bp Tuesday to 245bp, they remained substantially wider than the 181bp seen on the 2025s of fellow oil exporter Mexico.
"The problem with Colombia is that not only do they have the highest oil dependence among investment-grade credits, but there is no recognition that this oil shock is permanent," said Morden. Continuación...