Investors cut exposure to Petrobras in mixed session
By Paul Kilby
NEW YORK, April 16 (IFR) - Latin American credit markets put in a mixed performance Thursday as investors cut some exposure to Brazilian oil company Petrobras after a substantial run-up in the credit.
While accounts have found some relief in expectations that audited financials will be released by month's end, many feel good news has largely been priced into the Petrobras story at this stage.
"We are neutral across asset classes and would look at further strength as an opportunity for investors to reduce risk on Petrobras bonds," said a bank in a note to clients today.
A second downgrade to junk - after Moody's rating action January - is still a possibility over the next 12 months given Petrobras's weak fundamentals, it added. Petrobras's investment spending is expected to be 20% lower over the next five years, Reuters reported today, citing a source at the company.
Against that backdrop, the belly of company's curve was ending about 11bp wider today, with the 2024s being quoted at around 462bp.
Meanwhile, sovereign debt prices rose and fell alongside US Treasuries, which saw yields jump on improving manufacturing data only to shrink later in the day. Brazil 2025s closed at around 99.50-99.75, while Mexico 2025s ended at 102.75-103.25.
Meanwhile, EM bonds enjoyed their fourth consecutive week of inflows, though investors are staying clear of EM corporate bond funds amid concerns about the impact of possible US rate hikes later this year, EPFR said today.
That said, lack of supply in the primary markets is driving investors into the arms of high-quality borrowers, including BBVA Colombia, which printed an upsized US$400m 10-year Tier 2 bond today on the back of some US$2.7bn in demand. Continuación...