LATAM WRAP-Investors reassess after Brazil downgrade
By Paul Kilby
NEW YORK, Sept 11 (IFR) - LatAm credit markets put in a mixed performance on Friday as investors reassessed their positions in the wake of S&P's decision to downgrade Brazil to junk.
Brazil continues to be under pressure as markets brace for more cuts in the corporate space as well as the knock-on effects of forced selling among passive accounts.
Bonds of state-owned oil company Petrobras, also downgraded by S&P this week, were largely wider except at the long end, where short-covering was providing some support.
Benchmark Petrobras 2024s were quoted at 730bp-720bp, some 30bp wider on the day as accounts take measure of the consequences for a company that now carries two junk ratings.
"Petrobras still has to rely on the international markets, and for them the cost of funding will increase," one trader told IFR. "They will have to adjust to this new reality."
Barclays has already named Petrobras as one of several Brazilian credits likely to be dropped from its Global and US Aggregate indices.
That move is likely to force passive index investors to drop the name in coming weeks.
"Some people are moving out of Petrobras into (investment-grade oil companies) Ecopetrol and Pemex," said a second trader. Continuación...