Latin American credits slip as weaker oil and FX weigh
By Paul Kilby
NEW YORK, March 10 (IFR) - Latin American credit was slipping alongside the rest of the emerging markets on Tuesday as fears over US rate hikes and an ongoing selloff in currencies continued to roil the asset class.
"It is all risk-off," said a New York based trader. "EM currencies are weaker, and local rates are blowing out. We have come too far too fast and all real money (accounts) are looking to take profits at the same time."
Brazilian credits once again were suffering the brunt of the sell-off. Uncertainty over the outcome of the Petrobras corruption scandal and doubts about the implementation of fiscal measures has prompted the market to take a hands off approach to the region's largest economy.
The Brazilian Real continues to get punished alongside other EM currencies to trade at around 3.12 against the dollar, while the Mexican peso was being quoted at 15.5397 to the US dollar.
Some have hoped that a weaker currency will help the country's flagging economy. Brazil's Finance Minister Joaquim Levy however was quoted in O Globo newspaper saying that a rebound in economic growth would depend more on austerity measures than benefits generated by a sliding Real.
The 6.25% 2024s issued by Petrobras were about 10bp wider this morning at 525bp-515bp, while the sovereign's 2025s had inched about a 1/4 of point lower to be bid at 93.87.
Weaker crude prices were also serving to further exacerbate downward price pressures in Venezuela, where President Nicolas Maduro called for more powers to counter the "imperialist threat" after the United States yesterday sanctioned officials from the oil-rich nation.
"In a response to Obama's new sanctions, Maduro will request an "Anti-Imperialist" Enabling Law," Jorge Piedrahita, CEO of broker Torino Capital wrote to clients this morning. "We think he needs an enabling law in case (his party) loses the upcoming congressional elections." Continuación...