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NEW YORK, March 9 (IFR) - Latin American debt markets were largely starting wider Monday led by Brazil as bond prices fail to catch up with an uptick in US Treasury prices following the start of the ECB's asset purchase program today.
Brazilian asset prices were feeling the brunt of the pressure as investors continued fret over President Dilma Rousseff's ability to implement austerity measures at a time when the investigation into corruption allegations at oil company Petrobras has increasingly left her party at odds with allies in Congress.
The country's currency, the Real, continued to act as a leading indicator for sentiment toward Brazil, dropping further today to hit 3.1098. Credit followed, with the sovereign's five-year CDS gapping about 10bp this morning to hit 265bp-268bp and Petrobras 2024s widening in a similar manner to trade at around 490bp.
This follows downward price action last week when JP Morgan moved Brazil to underweight from market weight on its emerging markets global diversified index (EMBIGD), while also downgrading Petrobras debt to neutral.
Against that backdrop, US Treasuries were coming off recent lows after strong employment data Friday sent yields higher on fears that the Federal Reserve would take a more aggressive stance on rates. With LatAm bond prices largely staying put, spreads against Treasuries have been widening, traders say.
Yields on the 10-year benchmark had slipped back to around 2.20% Monday following a nearly 14bp spike on Friday to 2.245% - its highest level this year.
The start of the European Central Bank's asset buying program today is providing some support to a US Treasury market that is looking increasingly attractive against falling bond yields across the Atlantic. But LatAm borrowers and their bankers are likely to wait for some more stability before moving forward with bond sales.
Last week's US rate moves certainly hit Costa Rica's recently minted 30-year which was trading this morning at 99.75-100.50 after peaking at 101.00 last week. The deal priced at par to yield 7.158%.
Bankers are anticipating more deals this month now that financials are fresh and some may also move on the renewed expectation that the Federal Reserve will soon tighten US monetary policy. "If rates go up, we will see more people prefund for 2016," said a DCM banker.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ from both S&P and Fitch, has mandated Deutsche Bank and JP Morgan to organize a series of fixed-income investor meetings in Europe starting in London on Wednesday.
The borrower will move on to Amsterdam on Thursday and Paris on Friday, and the following week it will meet investors in Frankfurt on March 16.
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.
Panama has filed with the SEC to sell up to US$3.04bn in debt, raising expectations that the sovereign could soon come to the international bond market. (Reporting By Paul Kilby; Editing by Jack Doran)