Brazil CDS at highest since crisis as sell-off deepens

jueves 24 de septiembre de 2015 16:36 GYT

By Paul Kilby

NEW YORK, Sept 24 (IFR) - The gloom hanging over Brazil deepened on Thursday as the ongoing sell-off pushed the sovereign's credit default swaps past 500bp, their highest level since the financial crisis.

Just days after many in the market thought Brazilian valuations were looking attractive, the latest bout of selling clearly unnerved even the most stoic of bond bargain-hunters.

"The narrative that Brazil is becoming cheaper: forget about it," one investor told IFR. "This will go to lower levels."

From the government's failure to enact fiscal reforms to a wide-ranging scandal at state-run oil company Petrobras, the steady drip of bad news is causing investors to lose hope.

As Siobhan Morden, head of LatAm strategy at Jefferies, put it: "There is a deficit of confidence."

Five-year credit default swaps issued against Brazil's sovereign debt hit a peak of around 525bp at one point Thursday, before falling back to 490bp by day's end, one broker said.

The peak marked the country's highest CDS level since October 2008, in the wake of the collapse of Lehman Brothers, according to Thomson Reuters data.

Some say the collapse in credit prices, at least in the case of Petrobras, is due to forced selling by high-grade index investors unable to hold a company now holding two junk ratings.   Continuación...