LATAM WRAP-Investors see value as Brazilian credits sink

martes 15 de septiembre de 2015 14:42 GYT

By Paul Kilby

NEW YORK, Sept 15 (IFR) - Some investors are spying opportunities in Brazil even as the country's bond markets sink lower following S&P's decision last week to demote the sovereign and Petrobras to junk.

"(One of) our biggest overweights is in Brazil," Michael Cornelius, EM portfolio manager at T. Rowe Price, told reporters in New York on Tuesday.

The asset manager remains overweight Petrobras, the state-owned oil company at the center of a far-reaching corruption scandal whose bonds have suffered dramatic price swings this year.

Petrobras's debt took another leg down in recent days after S&P gave it a second junk rating following Moody's decision in February to cut it to Ba2.

Indeed, the company is no longer being traded as a high-grade credit, and for the first time today was being quoted with dollar prices rather than on a spread basis.

Its 2024s widened all the way to 800bp over Treasuries on Monday, but were essentially flat in price terms today at around 78.25-79.00. "Petrobras is singularly focused on deleveraging and we like that," said Cornelius.

He has also switched to a neutral position on Brazil sovereign debt. "We were underweight but it has gotten too cheap with the downgrade," he said.

The forced selling of Petrobras bonds among passive high-grade accounts as the issuer drops out of investment-grade indices is expected to become more widespread as other Brazilian corporates downgraded.   Continuación...