Brazil leads LatAm credit markets higher
By Paul Kilby
NEW YORK, April 1 (IFR) - Bonds issued by Brazil's embattled oil company Petrobras were rallying after the company clinched US$3.5bn in financing from the Chinese Development Bank and President Dilma Rousseff said in an interview with Bloomberg that audited results would be released by month's end.
"It is risk on and it is all about Brazil," said a New York based trader.
The short end of the Petrobras curve is starting the day some 40bp-50bp tighter, though some traders think that investors should take this opportunity to lock in profits.
"At these levels it is a sell," the trader said.
Petrobras 2016s, 2024s and 2044s were respectively being quoted at 450bp, 485bp and 490bp, normalizing the slope of the curve.
Sovereign debt was also following suit as investors sought exposure to Brazilian country risk. Brazil's 2025s were trading up at 98.50-99.00 after closing yesterday at 98.00, while five-year credit defaults swaps were being quoted some 7bp tighter at 276bp.
"We have seen demand for Brazilian risk," said Klaus Spielkamp, head of fixed-income sales at Bulltick in Miami. "We are still far from solving the (Petrobras) problem, but this news is good for sentiment."
Meanwhile, weaker-than-expected ADP job numbers have spurred a rally in the US Treasury market where the yield on the 10-year has sunk to 1.89%. That plus a jump in oil prices as Iran nuclear talks reach an impasse are helping to support debt prices in Latin America. Continuación...