LATAM WRAP-Brazil debt little-changed despite Fitch downgrade
By Paul Kilby
NEW YORK, Oct 15 (IFR) - Brazilian credits were little-changed on Thursday even after Fitch downgraded the sovereign and Petrobras postponed a local bond sale.
Fitch fell in line with Moody's when it downgraded Brazil to BBB- from BBB - a notch above sub-investment grade.
The agency's negative outlook, however, sets it apart from Moody's, which still has a stable outlook, and makes a demotion to junk in the coming months more likely.
Indeed, Barclays expects either Moody's or Fitch, or both agencies, to demote the sovereign to junk as soon as the first half of 2016, following S&P's decision to cut the country's rating to BB+ just last month.
The market's response to Fitch's downgrade was however muted, with many credits trading a touch lower or even flat on the day after enjoying a strong start to the session.
The country's five-year CDS, for example, widened to 447bp from an intra-day tight of 440bp, but was still 3bp tighter than Wednesday's closing levels.
"People have been buying on dips, though it could be short covering," said a New York-based trader.
Bonds issued by Petrobras, the state-owned oil company embroiled in a widening corruption scandal, were also steady despite its decision to postpone a R$3bn bond sale in the domestic market. Continuación...