UPDATE 2-Brazil bonds, swaps hit by junk downgrade

miércoles 16 de diciembre de 2015 14:12 GYT

(UPDATES throughout, CHANGES byline)

By Hillary Flynn and Davide Scigliuzzo

NEW YORK, Dec 16 (IFR) - Brazil's sovereign bonds and credit default swaps widened dramatically Wednesday after Fitch stripped the country of its investment-grade credit rating and lowered it to junk.

The widening reflected deepening worries about Brazil, where months of political turmoil and a corruption scandal at state oil giant Petrobras have hampered efforts to revamp the economy.

Finance Minister Joaquim Levy said that Fitch's downgrade to BB+ was "serious" and remained silent when reporters asked if he would continue to keep his job.

S&P demoted Brazil to BB+ in September, and while a second downgrade had already been priced in by much of the market, the sovereign's bonds and CDS still took a hit in secondary trading.

Five-year CDS - a measure of the cost to insure bonds against a default - became more expensive, widening 37bp to a mid-price of 491bp.

Meanwhile Brazil's US dollar bonds were 2.5 to 3.5 points lower at midday after dropping as much as 4 points on the news, one LatAm bond trader in New York told IFR.

"The sovereign is getting hit hard but we are bouncing off the lows," he said.   Continuación...