NEW YORK, June 15 (IFR) - Latin American credit markets were trading against a weaker backdrop Monday, as concerns about Greek debt talks and lower oil prices weighed on sentiment.
Some stability in US Treasuries buoyed sovereigns, but overall the tone was risk-off for a region still nervous about possible US rate hikes and ongoing outflows from EM debt funds.
"In general spreads are wider, but we have had better buying of sovereigns as rates stabilized (Monday)," said a New York-based trader.
Yields on the 10-year US Treasury were back down at 2.35% by Monday afternoon, but investors lacked conviction after last week's rout in rates and ahead of the start of the FOMC meeting on Tuesday.
"People are getting tired of rate volatility," said a second trader. "They have no idea where Treasuries are going to open or close, so people are staying sidelined."
Low-beta sovereigns have caught a better bid against that backdrop, as have Colombian bank bonds, which slipped last week after Moody's changed its rating methodology, resulting in lower ratings for Grupo Aval and its subsidiary Banco de Bogota.
After dropping to around 101-102.00 on Wednesday, Grupo Aval and Banco de Bogota's 2017s were back up today at 103.50-104.125 and 103.25-104.25, respectively.
"Value investors believe in those banks as infrastructure plays and are buying them on weakness," said the first trader.
Elsewhere recently issued bonds were putting in a mixed performance, with Petrobras's new Century bond some 10bp wider at 519bp as yields on the 30-year Treasury hit session highs in afternoon trading.
The Brazilian oil company's 2024s were ending several basis points wider at 429bp-423bp.
However, Mexican state-owned utility CFE was watching spreads hold steady on its new 30-year, which was trading at around 295bp-297bp after pricing last week at 300bp.
So far primary market activity remains subdued, with borrowers largely waiting to see market reaction to the two-day FOMC meeting that concludes on Wednesday.
The Government of Aruba, rated BBB+ by S&P and BBB- by Fitch (both stable), has mandated Credit Suisse and Raiffeisen Schweiz to lead a roadshow in Switzerland this week.
The Caribbean island is a part of the Kingdom of the Netherlands. The deal is "supervised" by the Netherlands but does not have an explicit guarantee.
Jamaica is readying investor meetings in Europe and the US through Citigroup, according to an investor.
The country, rated Caa2/B/B-, will see accounts in Los Angeles on June 16, New York (18), Boston (19), London (22), Germany (23) and wind up in Amsterdam on June 24.
Meetings are being described as a non-deal roadshow, but markets have been expecting the sovereign to raise funding to retire a PetroCaribe loan owed to Venezuela.
Utility AES Panama, rated BB-/BB+, will hit the road next week through Deutsche Bank and Banco General to market a possible 144A/Reg S senior unsecured bond.
The company visited accounts in Santiago and London on Monday and will head to New York and the West Coast on June 16 and the West Coast and Boston on June 17.
Proceeds are expected to finance a tender for US$300m in outstanding 6.35% 2016s.
AES Panama is the country's largest electricity generation company. Panama (Baa2/BBB/BBB) owns 50.4% of the company, while AES Corporation (Ba3/BB-/BB-) holds a 49% stake. (Reporting by Paul Kilby; Editing by Marc Carnegie)