Brazil surprises as rally extends
By Paul Kilby
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." Continuación...