LatAm credit markets remain resilient against US rate moves
By Paul Kilby
NEW YORK, May 11 (IFR) - Latin American credit prices continued to hold their ground against yet another sell-off in the US Treasury markets where the yield on the 10-year benchmark gapped back to 2.26% today.
Investors have yet to turn their backs on the asset class, but traders are fearing prices could buckle should Treasuries suffer further volatility.
"People are worried that a back up in rates will put pressure on (LatAm credits) but so far nothing has happened," said a New York based trader.
Prices on sovereign debt did take a hit on Monday, including Brazil 2025s, which were being bid as low as 98.50.
Investors are also beginning to fret about rate volatility, its possible knock-on effects to local currencies and what this means for Latin American credits holding dollar debt.
"Higher US rates are bad for the asset class, but the main impact will come through the FX transmission," said an EM investor. "The dollar will appreciate more and that will deteriorate credit quality further."
Prices on bonds issued by Brazilian oil company Petrobras also tumbled about one point to around 99.00 bid, though spreads were only marginally wider at around 418bp.
The opposite held true for some of the region's higher yielding names, including beef company Minerva whose 2023s were up about 1/2 point at 102.50. Continuación...