NEW YORK, May 18 (IFR) - Brazil was leading LatAm credit markets higher Monday following a rally in state-controlled Petrobras and a new issue from Itau-Unibanco - the country's first dollar bond of the year.
While a reversal in US Treasury gains dampened strong buying activity earlier in the morning, the tone remains positive for the region.
Stronger-than-expected first quarter results sent Petrobras's bond curve some 15-20bp tighter this morning after the embattled oil company reported a 50% year-on-year jump in Ebitda.
"We had a lot of demand for Petrobras this morning," said Klaus Spielkamp, head of fixed-income sales at Bulltick. "This is what everyone wants to see. They are lowering capex and leverage and increasing Ebitda. It is all good in credit terms."
Board approval for an up to R$3bn (US$994m) local bond issue was also seen as a positive despite concerns about high leverage. "It is debt neutral as they are refinancing debt (with the local bond)," said a New York syndicate manager.
Brazilian sovereign debt was also enjoying a stronger bid with the 2025s being quoted at 98.50-98.90, up from the 97.65 mid price low seen last week.
This comes as Brazilian bank Itau-Unibanco approaches investors with the country's first dollar bond of the year - a three-year benchmark size offering with initial price thoughts set in the low 200s over US Treasuries.
Pricing is expected later today through bookrunners BB Securities, BAML, Citigroup, Itau BBA and Santander.
Elsewhere in the region, markets are once again focusing on a possible issue from the Province of Buenos Aires after local news paper Ambito Financiero reported Monday that the issuer is looking to tap the market to address the US$1.05bn falling due on the October 2015s.
"I would expect them to come soon," said a banker away from the deal. "They did some investor work so I would guess they are trying to find the right window."
The borrower has long been eyeing an international bond issue after mandating leads BNP Paribas and Citigroup over a year ago. The province is considering a US$500m-US$750m, seven to 10-year bond sale at rates below 10%, according to Ambito Financiero.
Whether the borrower can achieve such price targets is a matter for debate, however, especially when its 2021s are trading at 10.50%. "I don't think they could come inside 10% (right now,)" said the banker. "I am sure they are waiting as the 2021s were trading at around 9.50% in mid April." (Reporting By Paul Kilby; Editing by Sudip Roy)