NEW YORK, Dec 3 (IFR) - Brazil was outperforming on Thursday as the market found some hope in impeachment proceedings against the country's president while LatAm debt prices largely tracked US Treasuries lower.
Brazilian credits trimmed some gains but were still largely stronger on the day, as investors grew more optimistic about a possible change of government despite the complications of impeachment proceedings against President Dilma Rousseff.
"The market had priced in that the government would keep spending and forget about any austerity plans," said a trader. "Since there is a possibility that Dilma won't be there anymore, the scenario looks better."
Brazil five-year CDS tightened about 10bp to around 438bp-448bp early Thursday only to widen out to about 444bp-450bp.
The 2024s issued by oil company Petrobras were about a quarter point higher at 77.75-78.75, while miner Vale was about 5-10bp tighter with the 2022s trading at 595bp-585bp.
However, traders saw little momentum behind Thursday's brief rally given the uncertainty over the length of the impeachment process or whether the president would leave at all.
"Things rallied but we are not seeing any follow through," said a second trader. "There is no meaningful flow to substantiate the rally."
BTG Pactual bonds continued to slump, however, following the arrest and resignation of its CEO.
The 2020s were down another three points at a mid-market price of 55.00.
S&P downgraded the bank on Thursday to BB- from BB, citing the bank's weak liquidity position.
"...the bank has a material liquidity gap in meeting its financial obligations in the next 60 days, unless BTG is able to sell assets or access credit facilities with Brazilian financial regulators," S&P said.
Elsewhere, LatAm spreads were tighter but prices were lower as US Treasury yields jumped on Thursday after the European Central Bank disappointed markets with a milder than expected easing in monetary policy.
The recently issued 10-year from Mexican REIT Fibra Uno has enjoyed little upside since it was priced last week at 99.303 to yield 312.5bp over US Treasuries.
The bond was trading at 99.00-99.375 on Thursday, though tighter on a spread basis at 310bp.
"It is the right sector but failed to build enough investor appetite," said a third trader. "It makes me pause about adding risk into year end."
Argentina E&P company Medanito has selected Itau and UBS to take it on an international roadshow ahead of a possible capital markets transaction.
The company will meet fixed income investors in London on December 7, in Switzerland on December 8 and in New York on December 9 and 10. Expected rating is CCC+ by Fitch.
Pemex (Baa1/BBB+/BBB+) mandated Barclays and HSBC for an investor call that was scheduled for Wednesday.
Arcos Dorados, the largest McDonald's franchiser in South America, held a Swiss roadshow last month via Credit Suisse. The Argentina-based, NY-listed company is rated Ba3/NR/BB+.
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+.
Brazilian airline Gol (B3/B-/B-) has completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)