NEW YORK, Dec 15 (IFR) - Latin American credits recovered some of their recent losses on Tuesday as investors cut shorts ahead of a much-awaited rates decision from the Federal Reserve.
Mexico and Brazil led the gains among sovereigns, with their five-year credit default swaps tightening as much as 19bp and 13bp respectively, according to Markit data.
Corporate bonds were also better bid, with the curve of Chilean miner Codelco, for example, seen 15bp-30bp tighter in spreads, according to a corporate bond trader.
“There is a bunch of short-covering into the Fed after a couple of very bad days,” the trader told IFR.
The Federal Reserve is widely expected to raise interest rates for the first time in a decade on Wednesday.
State-run oil companies such as Brazil’s Petrobras and Mexico’s Pemex also saw better buying as oil prices staged a modest recovery after approaching 11-year lows on Monday.
WTI and Brent crude were approaching the end of Tuesday’s session up 2.15% and 0.79% respectively.
Petrobras’s 2024s were ending 1.5 points higher in price at 73.5-74.5, while Pemex’s 2035s were one point higher at 88-89, according to the trader.
Elsewhere in the region, Ecuador took an unprecedented step in its financial history, repaying principal on a maturing global bond for the first time ever.
“We’ve just sent US$650m to pay the entire 2015 bond. First time in history,” President Rafael Correa said on Twitter near midnight on Monday. (Reporting by Davide Scigliuzzo; Additional reporting by Reuters News; Editing by Marc Carnegie)