Petrobras sheds some gains in wake of rally
By Paul Kilby
NEW YORK, March 4 (IFR) - Latin America markets were giving back some gains Wednesday as Brazilian names led by state-controlled oil company Petrobras widened alongside broader markets.
After asset sale plans spurred a significant rally yesterday, Petrobras bonds were some 2bp-5bp weaker today amid headlines that Congress was pushing back against President Dilma Rousseff's austerity measures.
The news has soured the mood around credits in Brazil as investors once again turn their attention to the country's flagging economic growth, widening CDS spreads and pushing the Real to 2.97 per US dollar.
The country's state-owned banks are also seeing their bonds under pressure amid expectations they will bear the brunt of any support for Petrobras.
Petrobras' 3.875% 2016s, 6.25% 2024s and 7.25% 2044s were respectively being quoted at 515bp-470bp, 502bp-495bp and 512bp-502bp.
Petrobras extended its contract with auditor with PricewaterhouseCoopers but investors still fear that unexpected surprises from the widening corruption scandal threaten to upend any gains from the company's asset sale plans.
Reuters reported Tuesday that the country's top prosecutor is seeking to widen the probe into kickbacks among some high-profile politicians, raising expectations that more volatile price action is likely in coming weeks.
"While recent news have been positive, the unexpected consequences of ongoing investigations give us pause and make us believe that wider spreads are on the horizon," Jorge Piedrahita, CEO of broker Torino Capital, wrote to clients this morning. Continuación...