Brazil tightens as LatAm credits extend gains

martes 24 de marzo de 2015 09:52 GYT

By Paul Kilby

NEW YORK, March 24 (IFR) - Brazilian sovereign and corporate bonds continued to rebound on Tuesday after S&P affirmed the country's Triple B minus rating yesterday, assuaging concerns of a near-term downgrade to junk.

"It is a reminder that the situation in Brazil is not that bad, and markets are liking that," said Rodrigo Covian, a trader at Bulltick in Miami.

For now, investors are largely shrugging off the rating agency's decision to also revise its outlook on state-controlled oil entity Petrobras's Triple B minus rating to negative.

The move sets the credit on a path for another demotion to sub-investment grade following a similar move by Moody's in February.

Explaining its decision, S&P cites expectations that Petrobras will see weaker cash flows and a more leveraged balance sheet this year and next.

"The ongoing corruption investigations not only squeezed financing of Petrobras' investment plan, but also weakened its main contractors' creditworthiness and slowed the construction of the oil rigs to ramp-up production," the rating agency said.

Despite that, Petrobras bonds were another 10bp tighter this morning after a decent rally yesterday, with the 2016s, 2024s and 2044s at around 640bp, 530bp and 545bp, respectively.

While little has changed to improve the outcome of the corruption scandal that has racked the oil entity and other credits associated with it, investors have been bargain hunting and riding the price movement higher.   Continuación...