NEW YORK, Oct 1 (IFR) - Brazilian bonds enjoyed a second day of higher prices Thursday, defying negative sentiment in the broader markets and turning a blind eye to the country's ugly fundamentals.
Bonds were 1.5-4.0 points higher on the day in the wake of Wednesday's rally, which was sparked by news that oil company Petrobras would hike domestic fuel prices.
The 2024s issued by Petrobras were quoted as high as 79.00 on Thursday before closing at around 75.50-76.50 - a good four points stronger on the day, according to data from Trace.
Traders saw little to justify the turnaround, putting the rally down to short-covering and bargain-hunters following the unwinding of Petrobras exposure among high-grade accounts.
A spike in daily trading volumes to around US$2bn on Wednesday was seen as a sign that Petrobras bonds were being recycled.
"This is a redistribution process, so we are more optimistic on Petrobras," said Jorge Piedrahita, CEO of broker Torino Capital.
For now investors are shrugging off the deteriorating fiscal and economic backdrop in Brazil, where on Thursday Congress postponed a key vote on public spending for a second time.
"Nothing has changed to give you more confidence in the country," another trader said. "But I think people are realizing there was an overshoot in this market."
The Brazilian currency was arguably a better indicator of the gloomier underlying reality, touching the R$4 mark again on Thursday.
A police raid on the offices of beef company Marfrig acted as a reminder of the country's ongoing troubles, sending the company's bonds several points lower.
No new deals stepped into the primary across the region on Thursday, and with US payroll data emerging Friday, borrowers are unlikely to pull the trigger until at least next week.
"No one will do anything now," one syndicate banker told IFR. "Brazil changed the tone yesterday, but no one wants to come."
Mexico's state-owned Bancomext wrapped up roadshows last week through Bank of America Merrill Lynch and HSBC to arrange meetings with fixed-income investors ahead of a potential US dollar-denominated 144A/Reg S bond sale.
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican real-estate investment trust Fibra Uno has completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-. (Reporting by Paul Kilby; Editing by Marc Carnegie)