LatAm high-grade credits sink with US Treasuries
By Paul Kilby
NEW YORK, March 6 (IFR) - Latin American high-grade sovereign credits were under pressure Friday morning as US Treasuries sold off in the wake of the strong US employment report.
With payroll data showing a larger-than-expected hiring number of 295,000, rate fears have once again moved to the fore as markets price in the possibility that the Fed might tighten monetary policy sooner rather than later.
Those concerns pushed sovereign debt lower Friday, with Brazil 2025s falling close to a point on the day to 95.70. Mexico 2025s were also about one point weaker at 100.20.
It was a similar story for Costa Rica's new 7.158% 2045, which has fallen to 99.50 on the rate move after hitting a high of 101.00 following yesterday's par pricing.
The dollar meanwhile rose to an 11-year high this morning against other currencies in response to the payroll data, impacting Latin American FX as well.
The Mexican peso was trading at 15.4 against the dollar this morning, marking a 3.24% decline over the last three days. The Brazilian Real has suffered a 7% decline since late February to trade today at 3.04.
Higher yields and weaker currencies spell trouble for corporate Latin America with several companies already telling investors that FX volatility has bitten into their bottom line.
"I am seeing a lot of company saying they had losses because of FX," said a trader. "This has to be a big focus for investors." Continuación...