Brazil faces year of diminishing bond supply
By Paul Kilby and Davide Scigliuzzo
NEW YORK, Sept 19 (IFR) - Bankers and investors are bracing for a painful year ahead for Brazil and one that is likely to see less primary issuance from Latin America's largest economy in the wake of presidential elections in October.
The prospects that President Dilma Rousseff could lose the election next month has put a floor under Brazilian asset prices, but the sovereign's fundamentals continue to deteriorate, making next year a period of adjustment for whichever candidate is chosen to govern the country.
Moody's decision to put Brazil's Baa2 rating on negative watch earlier this month only reinforced the gloom over Rousseff's leadership of the economy.
"You look at every macro variable in Brazil and see signs of deterioration," said Marco Santamaria, a global fixed-income portfolio manager at Alliance Bernstein. "Even the administration sees that."
For now, talk about the outcome of Brazil's forthcoming presidential elections has taken centre stage as investors hope that a change in government next year will set the stage to turn round the country's flagging economic growth.
Marina Silva's sudden surge in the polls once she became the Brazilian Socialist Party candidate after the death of her running mate Eduardo Campos in a plane crash in August has raised optimism over the prospects for a credit that has long lost its lustre among the buyside accounts. Continuación...