NEW YORK, Feb 10 (IFR) - The back-up in US rates along with weaker crude oil prices were weighing on Latin American credit markets Tuesday morning, leaving newly minted issues struggling to gain momentum.
Traders reported some selling on the back of the weaker US Treasury market, where yields on the 10-year topped 2% for the first time in about a month before receding to 1.98%.
Prices on new bonds such as Chilean retailer Cencosud’s 10s and 30s continue to hover around re-offer levels, and low-beta sovereigns are also fighting an uphill battle.
“A lot of these guys didn’t hedge their rate exposure and we have seen a 37bp back-up in rates,” said a New York-based trader.
Mexico’s 2044s are down a good point at 103.375-103.875 this morning, while Brazil 2025s have followed a similar downward trajectory to hit 97.50-98.00.
Troubled Brazilian oil giant Petrobras was bucking the trend - despite the volatility of crude prices - as its bond prices inched tighter on Tuesday morning.
This came after local newspaper Folha de Sao Paulo reported that newly selected company president Aldemir Bendine was planning a call with local and international investors.
Bendine may provide some clues as to how newly installed management will address a corruption scandal that could results in billions of dollars in write-downs.
Other oil names were also holding up well despite the threat of weaker crude prices after the International Energy Agency warned that higher stockpiles could mean another sell-off.
Bonds issued by oil company Pacific Rubiales were holding on to yesterday’s gains, while those of Colombia state-owned oil outfit Ecopetrol were advancing. Its 2045 were being quoted at 98.00-98.50, while its 2025s were being spotted at 95.25-96.00.
In the primary markets, the higher US Treasury yields may have heightened any urgency felt by borrowers seeking to tap the markets this year ahead of potential rate hikes in the US.
But with blackout periods approaching, bankers think the vast majority of issuers are likely to wait for now.
The City of Buenos Aires announced a series of investor meetings ahead of a potential 144A/Reg S bond issue. BAML, HSBC and JP Morgan are the lead managers. Senior officials are wrapping up meetings in New York today.
Grupo Senda Autotransporte, a Mexican bus transportation company, has finished roadshows ahead of a possible USD 144A/Reg S bond offering. Expected ratings are B/B (S&P; Fitch). CS and JP Morgan are active bookrunners, and BBVA passive.
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. Pricing is expected toward end of February.
Bankers are still awaiting a mandate decision on an up to USD1bn 144A/Reg S bond offering from Costa Rica after the sovereign sent out a request for proposals last month. (Reporting by Paul Kilby; Editing by Marc Carnegie)