24 de agosto de 2015 / 20:00 / en 2 años

LATAM WRAP-LatAm credit prices find unsteady floor

NEW YORK, Aug 24 (IFR) - LatAm debt markets were off their lows on Monday following China’s dramatic stock rout, but a cautious mood prevailed as investors focused on the region’s deteriorating fundamentals.

Bonds were still 10bp-50bp wider by early afternoon, though flows remained light as investors assessed the damage from the day’s global market slide.

“No one wants to validate these levels,” said a New York-based trader. “Clients are in selling mode, but they are not liquidating so far.”

LatAm bond prices found an unsteady floor amid hopes Chinese authorities might announce liquidity measures or a broader growth package that could keep commodity prices from taking another leg down.

“It is significant,” said an investor. “If China doesn’t do something overnight, this will feed on itself, especially when liquidity is worse than usual.”

Concerns about Chinese growth and crumbling oil prices have led to dramatic price swings over the last few days, as the outlook for the commodity-reliant region continues to dim.

LatAm oil names have taken a particular bashing of late, with Brazil’s Petrobras gapping out another 40bp on Monday. Its 2024s were spotted at 680bp-655bp, marking a 160bp widening since late July.

Prices on Argentine oil name YPF’s 2025 also sunk a good four points today to hit 90.25, the lowest level since it was priced in April at 99.097.

Mexican state-owned oil company Pemex has held up better than most following the government’s decision earlier this month to hedge the price of its oil exports at US$49 a barrel.

Budgeting for that price may have seemed conservative at the time, but the results certainly make Pemex look smart after US crude hit a fresh 6.5-year low today at US$39.71 a barrel.

Still some analysts think the LatAm credit markets have yet to truly price in Chinese policy changes and the shifting landscape for commodities.

The widening on Petrobras bonds arguably reflects those doubts, not to mention political risks arising from the massive corruption investigation of the company.

But debt prices on other Latin American commodity names still look tight to some.

At around 250bp over US Treasuries, Pemex 2021s are trading inside the average US energy name in the Triple B space, which currently stands at around 290bp, said one strategist.

“That spread doesn’t make sense,” the strategist said. “Not only does US equity need to catch up with what is happening in EM, but EM needs to catch up with itself.” (Reporting by Paul Kilby; Editing by Marc Carnegie)

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