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.
Local newspapers have Macri ahead of ruling party rival Daniel Scioli to win the November 22 run-off.
GDP warrants, floundering around 8.4 on expectations of a Scioli victory, have rallied in recent days and hit 9.50-10.00 Wednesday as investors bet on improving growth under Macri.
Brazilian bond prices were also enjoying a bit of a bounce as investors refocused their attention on state-owned banks such as BNDES and Caixa.
“The attention has shifted to other bonds away from Petrobras,” said one trader.
The short-end of the BNDES curve was well bid, with the 2016s quoted at 99.90-100.25. The 2025s issued by the Brazilian sovereign were also inching higher to be bid at 89.00.
CAF (Aa3/AA-/AA-) held a call on Tuesday ahead of a potential euro-denominated Reg S benchmark transaction. BAML, CA-CIB, CS and HSBC arranged the call.
Mexican development bank NAFIN has finished roadshows ahead of a possible 144A/Reg S Green bond through leads Bank of America Merrill Lynch, Credit Agricole and Daiwa. It is expected to be rated A3/BBB+ (Moody‘s/Fitch).
Peru (A3/BBB+/BBB+) has wrapped up roadshows through BBVA, BNP Paribas and JP Morgan to update investors on the country’s financing program and discuss developments in the economy.
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower mandated Barclays and Citigroup as lead managers, with Itau as co-manager. Expected ratings are Baa3/BBB-.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting by Paul Kilby; Editing by Marc Carnegie)