NEW YORK, April 6 (IFR) - A rally in global oil prices lifted energy-related names while a sell-off in US Treasuries helped sovereign and corporate spreads tighten in the Latin American debt markets on Monday.
Brazil’s five-year credit default swaps were ending the day between 8bp and 9bp tighter at around 245bp, while the country’s cash bond spreads were 10bp tighter, said a trader in New York.
Notes issued by other low-beta sovereigns in the region including Mexico and Colombia were also ending tighter.
Oil-related sovereign and corporate credits benefited from a 5% jump in Brent and WTI crude prices, as traders reassessed how quickly Iran could increase oil exports following a preliminary nuclear deal with six world powers and signs of a slower build-up of US crude inventories.
Venezuelan bonds ended the day between one and two points higher, with state-owned PDVSA’s 8.5% 2017s and 2024s at 68.5 and 34.25 respectively and the sovereign’s 2027s at 42, according to the trader.
Meanwhile, Colombia-focused Pacific Rubiales saw its 2021s trade up by roughly a point and a quarter, with the notes ending the session at a cash price of around 67, another trader said.
Bond prices of Brazilian oil services firm Schahin, however, dropped by as much as 10 points following local reports that the company will file for bankruptcy protection.
“There was some selling but I don’t think all market participants were back after the holidays, so we will get a better picture tomorrow,” said the second trader, who had the company’s 2022s quoted at around 50-51 at the close.
Despite the slow start to the week, bankers expect primary activity to gradually pick up between mid-April and mid-May, before corporates enter black-out periods.
“(Investors) have cash to put to work and everyone wants to see more corporate supply. We should start to see more,” said a New York-based syndicate banker. (Reporting by Davide Scigliuzzo; Editing by Shankar Ramakrishnan)