NEW YORK, June 6 (IFR) - Peruvian debt inched tighter on Monday in a somewhat muted response to market-favorite Pedro Pablo Kuczynski's surprise lead in the country's presidential election.
Spreads on Peru's five-year credit default swaps were about 6bp tighter at 144bp, while the sovereign's dollar bonds, which trade at very high dollar prices, were about 1/8 of a point higher, according to a New York-based trader.
The outperformer was Peru's euro-denominated 2026, which climbed about 3/4 of point to hit 104.25-105.00.
"I would have expected a bigger gap tighter, but either candidate would have been a market friendly outcome so some of that had already been discounted," said the trader, who thought CDS would eventually return to its March tights of around 133bp.
Kuczynski, popularly known as PPK, had been trailing in the polls behind Keiko Fujimori, the daughter of imprisoned former president Alberto Fujimori.
But partial results Monday showed him eking out a one percentage point lead, setting him on course to take the presidency later this year.
While both candidates espoused market friendly policies, Kuczynski - a former banker and investor - had been Wall Street's preferred choice.
"The initial reaction should be very supportive," said Siobhan Morden, head of Latin America debt strategy at Nomura.
"It reaffirms Peru's safe-haven status. It should be a natural rotation trade out of Mexico."
A Kuczynski presidency would face some challenges, however, given that Fujimori's party still holds a solid majority in Congress.
"This may impose constraints in terms of governability," said Morden. (Reporting by Paul Kilby; Editng by Marc Carnegie)