LATAM WRAP-LatAm credit markets mixed as Brazil slides
By Paul Kilby
NEW YORK, Aug 4 (IFR) - LatAm credit markets put in a mixed performance on Tuesday as investors continued to turn their backs on Brazil in the face of a possible downgrade to junk next year.
While some on the buyside think rating agencies could show forbearance, large sellside shops such as JP Morgan are already forecasting the sovereign's demotion to junk by 2016.
Either way, Brazilian asset prices are being pressured lower by uncertainty over the credit standing, as well as the ongoing corruption investigation at Petrobras.
That inquiry resulted this week in the arrest of former president Luiz Inacio Lula da Silva's ex-chief of staff.
Spreads on Brazil's five-year CDS were back near 305bp on Tuesday, while the sovereign's 2025 continues heading south after an initial bounce last week following S&P's decision to place the country's BBB- credit rating on a negative outlook.
It is a similar story for Brazilian corporate credits, which were ending the day another 8bp-10bp weaker.
"We keep imploding," said one New York-based trader. "There are just no buyers in Brazil."
A weakening Real - which hit 3.46 against the dollar on Tuesday - and the country's deteriorating economic scenario have the market particularly nervous about credits that generate local revenues but hold dollar debt. Continuación...