LatAm credits join rally on dovish Fed statement
By Davide Scigliuzzo
NEW YORK, March 18 (IFR) - Latin American credits reversed earlier losses and followed broader markets higher after the Federal Reserve struck a dovish tone on Wednesday following its two-day policy meeting.
While the central bank removed a pledge to be "patient" in hiking interest rates, it also signaled a more cautious outlook for the US economy and slashed its projected interest rate path.
"The removal of 'patient' was 100% priced in, but the pace (of interest rate increases) and outlook are still very cautious," said a Latin America sovereign bond trader in New York.
In the broad-based rally, Brazilian bonds outperformed, with cash bonds up as much as 2 points in price and five-year credit default swaps ending the day some 15bp tighter at 293bp.
Brazil's 2023s, for example, ended the session at 87.0-87.5, while the 2045s were quoted at 87.5-88.0, according to a New York-based broker.
The afternoon rally also lifted corporate names, with Brazilian bank bonds enjoying some demand towards the close after selling off sharply on Tuesday.
"Some of the Brazilian banks and longer duration bonds got lifted," said a corporate bond trader focusing on Brazil. "I saw buyers of Caixa, BNDES and Banco do Brasil."
An almost four-dollar swing in Brent prices, which bounced back to US$56 a barrel, pushed oil-related credits like Venezuela and PDVSA higher by between half and three quarters of a point. Continuación...