NEW YORK, Jan 15 (IFR) - Sinking oil prices, weak US economic data and continued concerns about Brazil were pushing Latin American bond prices lower on Friday ahead of a three-day weekend in the US.
“There has been derisking all week,” said a New York-based trader. “It seems like accounts are throwing in the towel on credit and people don’t want to take positions ahead of (long) weekend.”
The region is feeling the impact from a sell-off in the broader market as US stocks sink on concerns about a slowdown in China as well as worsening retail and industrial output data in the US.
The risk off tone is being reflected in the US Treasury market where yields on the 10-year US Treasury are now at 2.03%.
And while a rally in US Treasuries had provided support for the newly minted bonds from investment grade Chile and Mexico, those issues were also coming under pressure as investors looked to sell liquid assets.
“People are selling where they get liquidity,” said the trader. “There are bids to hit on new issues (from sovereigns) while there aren’t nearly as many bids on corporates in the secondary market.”
Chile’s new 10-year dollar trade - the first bond sale out of Latin America this year - was being quoted at 97.50-97.70, essentially flat to reoffer of 97.627.
Mexico’s new 10-year was putting in a similar performance and being quoted at 99.50-99.75 after pricing Wednesday at 99.676.
Brazil 2025s, however, were underperforming, falling about a point to hit 81.50-82.00 after President Dilma Rousseff said on Friday that she didn’t rule out injecting new capital into state-controlled oil company Petrobras.
“It helps Petrobras, but it doesn’t help Brazil as they will have to spend money to capitalize Petrobras,” said a second trader.
On the corporate front, Brazilian commodity focused credits were also sinking as crude prices hover just below US$30 a barrel. “The beta is oil and with oil below US$30, people are freaking out,” said the second trader.
The 2024s issued by oil company Petrobras were down about 1.25 points to trade at 66.50-67.50, while miner Vale’s 2022s have fallen another point to be bid at 70. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)