LATAM WRAP-Brazil credits resilient after junk rating
By Paul Kilby
NEW YORK, Sept 10 (IFR) - Brazilian credits were rebounding Thursday from earlier lows after S&P downgraded the country, which is facing its worst economic crisis in decades, to junk.
Troubled state oil giant Petrobras saw its 2024s widen 40bp-50bp on the news of the downgrade on Wednesday before tightening to 695bp-685bp.
The sovereign's five-year CDS was trading at around 390bp Thursday morning after hitting an earlier wide of 407bp, while its benchmark 2025s were at 89.75 versus 90.75 Wednesday.
Market participants believe much of the bad news surrounding the downgrade to BB+ from BBB- was already priced in.
"There will be some forced selling from high-grade accounts," one trader told IFR. "But they have already chopped a lot of that wood over the last few months."
Still, Brazil is now trading wide to Russia, which already carries Ba1/BB+/BBB- ratings and whose five-year CDS was being spotted at 383bp, according to a banker.
"It is hard to make an argument that Brazil should be trading wider than Russia," the banker said.
Many market-watchers think the other ratings agencies may soon follow S&P's lead. Continuación...