LATAM WRAP-LatAm credits tighten on oil price recovery
By Paul Kilby
NEW YORK, Oct 28 (IFR) - LatAm credits were on solid footing Wednesday as oil prices advanced and investors bet that the market's favored candidate in Argentina's presidential elections next month will win.
A 5% jump in oil futures and expectations that the Federal Reserve is likely to hold off on rate hikes until next year have provided a positive backdrop for emerging markets assets.
This includes oil-rich Venezuela, where markets are largely pricing in a payment on the 2015 bond issued by PDVSA that is due on Wednesday.
It is a similar story on the PDVSA 8.5% 2017s, which also have a multi-billion dollar amortization and coupon payment due on November 2. It was trading around 61-62 earlier Wednesday.
"The market is pricing in a virtual certainty of this payment taking place," said Michael Roche, EM fixed income analyst at the Seaport Group.
Yet while certainty of payment remains high for this year, markets are bracing for a credit event in Venezuela next year as international reserves fall to their lowest since 2003.
"You can see the progressive deterioration in bond prices (over the coming years), which is a reflection of this rapidly increasing default risk," said Roche.
Argentina meanwhile continues to prices moving up after the surprisingly strong showing of business friendly Mauricio Macri in the first round of presidential elections on Sunday. Continuación...