NEW YORK, March 17 (IFR) - Latin American credit markets ended another volatile session on a back foot on Tuesday. Buying appetite returned late afternoon but only to select credits.
“The market was pretty weak for most of the day,” said a corporate bond trader in New York. “Now a few people are cherry picking names that had cheapened too much.”
A rebound in US equities and US high-yield in the afternoon also helped improved sentiment, while in Brazil the Real closed stronger for the first time in a week.
“(US) high-yield started to turn around midday but it took a while to see that (spill over) into emerging markets,” said the trader.
Brazilian five-year credit default swaps ended the day 5bp tighter at 305bp mid-market after widening to as high as 320 earlier in the day.
Bonds of state-owned oil company Petrobras also bounced back from wides to close 5bp to 30bp weaker. The 2024s and 2044s, for example, ended the day at spreads of 605bp-595bp and 585bp-575bp respectively.
“Some of it was short covering, but the fact that the Brazilian Real for once is not closing lower also helped,” said a second corporate bond trader in New York.
After widening by between 6bp and 12bp earlier in the day, bonds issued by Brazilian miner Vale also recovered from their lows, with the 2022s spotted at 330bp-325bp, or 5bp wider on the day.
Brazilian bank Itau recorded one of the worst performances among financials, with its 2023s dropping 3 points to 93.5 before finding some buyers and ending the session at 94.5.
Elsewhere in the region, Mexican cement company Cemex managed to avoid losses all together after announcing that it intended to trim debt by up to US$1bn this year. Its 2025s ended the session unchanged at around 97.875 after weakening to just 97.75 earlier in the day.
In primary markets, a new bout of weakness in oil prices - WTI crude slid to a six-year low of $42.61 a barrel today - was seen holding back a potential bond issue from Ecuador.
“I think the drop in oil prices over the last week is what is preventing them from coming to market,” said one investor who met with the sovereign as part of the bond roadshow.
The country’s 2024s were spotted on Tuesday afternoon at a cash price of around 89 to yield 9.78%, according to a syndicate banker not involved in the transaction.
Colombia Telecomunicaciones S.A. (ColTel), Colombia’s second largest telecommunications company, has hired BBVA and HSBC as structuring advisors and joint bookrunners and Citigroup and Credit Suisse as joint bookrunners to arrange a series of investor meetings in the US, Europe and Asia.
A US dollar-denominated 144A/Reg S hybrid bond transaction may follow. The issuer is rated BB/BB, while the hybrid bond is expected to be rated B+/B. ColTel is 70% owned by Spain’s Telefonica S.A. and 30% owned by the Republic of Colombia. Meetings kicked off today in Bogota and continue until March 24.
The Republic of Peru (A3/BBB+/BBB+) has hired BBVA, Deutsche Bank and Morgan Stanley to arrange meetings with fixed-income investors. The sovereign visited accounts in Los Angeles and London on Tuesday and will wrap up in Boston on Wednesday.
Ecuador is expected to come to market a new US dollar-denominated bond sale as soon as this week through lead Citigroup.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ by both S&P and Fitch, also wrapped up investor meetings this week through leads Deutsche Bank and JP Morgan.
Mexican media company TV Azteca is bringing to market a rare project bond related to the development of the Andean country’s fiber optic network.
Reporting by Davide Scigliuzzo; Editing by Paul Kilby