NEW YORK, Sept 3 (IFR) - Brazil remained the underperformer on Thursday in an otherwise buoyant day for Latin American bond markets as oil prices recovered and investors focused on specific credit stories.
Brazilian credits remained under pressure amid speculation that Finance Minister Joaquim Levy may eventually step down following the country's first-ever budget to forecast a primary deficit.
Petrobras 2024s were being quoted 10bp wider, albeit at a wide bid-offer spread of 620bp-635bp.
Odebrecht bonds backed by drillships collapsed again today after Petrobras notified the company that it reserved the right to terminate a charter contract on one of its rigs which hadn't been in operation for over 60 days, said an analyst who had seen the notice.
Odebrecht Oil & Gas has told investors that the rig is ready to resume operations and the matter has been resolved, he said.
Still the company's 6.75% 2022s tumbled to 47.00 on Thursday, or about three points lower, as investors fretted about the value of the collateral backing the security.
"Brazil is wider but everything else is catching a bid," said a New York based trader earlier in the day. "People are selectively putting money to work ex-Brazil."
Venezuelan short-dated paper were rallying amid a jump in oil prices and talk the government was buying back bonds.
The 2016s and the old and new 2017s issued by state-owned oil company PDVSA were up to three points higher today to be quoted at 61.00-61.50, 45.00-45.50 and 71.25-71.75, respectively.
It was a similar story for the sovereign 2016s, which were being spotted at 82.50-83.00.
"These are the four bonds I would buy if I wanted to ease the cash (outflow) on debt over the next few years," said Jorge Piedrahita, CEO of broker Torino Capital. "After 2017 they have very few maturities."
"If PDVSA paid off all their 2016s at 63.00, they would save more than half a billion dollars," he said. "Why would you restructure when you already have a haircut of 30%?" (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)