LATAM WRAP-Brazil credits give back gains as Real sinks
By Paul Kilby
NEW YORK, Sept 23 (IFR) - LatAm credit continued to take its cue from events in Brazil, where dollar bonds were giving back earlier gains on Wednesday as the Real sunk further despite central bank intervention.
An initial bounce following the Brazilian government's success in preventing further public expenditures soon turned south amid profit-taking and further selling, said traders.
A steep sell-off in Brazilian corporate bonds this week brought out buyers lured by the cheap prices, but investors are reluctant to hold long-term positions in a country whose economic outlook remains bleak.
"It is cheap, but investors don't want to catch a falling knife," said a New York-based trader.
The 2024s issued by state-controlled Petrobras were closing flat at around 71.50-72.00 after reaching 72.00-73.00 earlier.
Credit followed the lead of FX markets, where the Real tumbled to 4.16 against the dollar on Wednesday despite the central bank's efforts to support the currency.
And while markets cheered news that Congress supported President Dilma Rousseff's veto on higher public expenditures, firm fiscal measures will be required to keep sellers at bay.
"We need something else," another trader told IFR. "We need approval of the fiscal actions that the government has been promising." Continuación...