NEW YORK, Oct 5 (IFR) - The short-end of the Petrobras bond curve, which faced the brunt of a recent sell-off, continued to strengthen on Monday and gave a solid boost to LatAm credit markets.
The 2017s and 2019s issued by the Brazilian state-owned oil company were about 50bp tighter versus Friday, according to a New York based trader.
Today’s rally extended last week’s jump in prices following Petrobras’s decision to hike fuel prices and a reshuffling of President Dilma Rousseff’s cabinet - a move that was seen as easing the way for the passage of vital fiscal measures.
“It didn’t make sense where Petrobras was trading,” said the trader. “Real money had until September 31 to get rid of those bonds so there was some overshooting.”
The rapid recovery in the beleaguered oil company’s bonds has raised speculation that it could take an opportunity to raise funding in the dollars market.
“Two more days of a rally like this and I wouldn’t be surprised if Petrobras announces a deal,” the trader said. “If they announced a 30-year at 10% people would jump.”
The better tone has raised hopes that borrowers waiting in the pipeline may try their luck, though bankers think a few more days of stability are required.
“Borrowers have to get comfortable that this is not a one-day thing,” said a syndicate banker. “Spreads are also still wider so issuers will have to wrap their heads around where things are trading and higher new issue premiums.”
Indeed the release of FOMC minutes on Thursday could well topple the market should they indicate that the Fed is still thinking of tightening monetary policy this year.
“The market has quickly swung in the direction that the Fed is on hold for the immediate future, but the only problem is that the Fed isn’t saying that,” said Bryan Carter, head of EM debt at Arcadian Asset Management.
“The market could be wrong. This may be a false sense of security.”
Mexico’s state-owned Bancomext wrapped up roadshows last week through Bank of America Merrill Lynch and HSBC to arrange meetings with fixed-income investors ahead of a potential US dollar-denominated 144A/Reg S bond sale.
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 real-estate investment trust Fibra Uno has 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 coming in as co-manager. Expected ratings are Baa3/BBB-. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)