NEW YORK, Aug 10 (IFR) - A handful of bottom fishers were scouring for cheap Brazilian assets on Monday following last week’s selloff, with some assuming that the market has already priced in a sovereign rating demotion to junk.
The sovereign’s benchmark 2025 was about a point off lows seen last week at 92.25-92.50, while five-year CDS was also some 7bp tighter at 319bp after hitting 330bp last week.
“Compared to Russia, I think Brazil is cheap,” said Klaus Spielkamp, head of fixed-income sales at Bulltick. “Russia is a full double B, it is very dependent on oil and its CDS has been trading at 350bp.”
Bank names like Banco do Brasil and Itau were also catching a slight bid, as was food company BRF, which was upgraded by Fitch last week to Triple B from Triple B minus. BRF 2024s, for instance, were seeing buyers at a 97.00 dollar price.
However, other market participants remain less sanguine about the market’s broader view on a country that many economists now think will see zero growth next year.
“The Brazilian moves today have more to do with the risk-on mode in the market than any idiosyncratic improvement in the mood regarding Brazil,” said Jorge Piedrahita, CEO at broker Torino Capital.
Elsewhere Argentine assets were giving back earlier gains on primary election results that showed leading presidential candidate Daniel Scioli failing to gather enough support to win a first round during presidential elections later in the year.
Such a scenario could put Scioli in a head-to-head race during a second round with market favorite Mauricio Marcri, opening the prospects of more radical policy changes.
Bonar 2024s were closing the day flat at around 97.00. “There were a few people trying to move the market higher, but it didn’t work,” said a trader.
This comes after investors shrugged off news that a US appeals count had reversed Judge Griesa’s broader definition of investors who could seek payment on Argentine defaulted debt under a class action suit.
“It really doesn’t change anything. It just puts small bondholders out of the game,” said the trader. “Argentina still has the problem of the larger holdouts led by Elliott.” (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)