LATAM WRAP-Downgrade fears rattle Brazil credits
By Paul Kilby
NEW YORK, Aug 6 (IFR) - Brazilian debt prices took another sharp leg down on Thursday as fears intensified that the sovereign will be demoted to junk-rated territory.
Faith in Brazil's ability to get its fiscal house in order is fading as the popularity of President Dilma Rousseff plummets in the polls and Congress resists spending cuts.
The latter problem was brought to the fore following passage of a bill in the lower house Wednesday to raise wages for some public employees and police officers.
Against that backdrop, speculation has been growing that Moody's may downgrade the sovereign by two notches to junk, instead of one notch to Baa3 as had earlier been expected.
Those concerns unnerved the market today, sending corporate and sovereign bond spreads wider by another 20bp-50bp.
"It is a disaster," one trader told IFR. "It is utter capitulation from real money."
Petrobras 2024s were being quoted at 563bp-553bp, while the state-owned oil company's Century bond was trading around 615bp-605bp over.
In mid-July, those securities were trading at 433bp-423bp and 515bp-510bp, respectively. Continuación...