NEW YORK, March 18 (IFR) - Latin American credits reversed earlier losses and followed broader markets higher after the Federal Reserve struck a dovish tone on Wednesday following its two-day policy meeting.
While the central bank removed a pledge to be “patient” in hiking interest rates, it also signaled a more cautious outlook for the US economy and slashed its projected interest rate path.
“The removal of ‘patient’ was 100% priced in, but the pace (of interest rate increases) and outlook are still very cautious,” said a Latin America sovereign bond trader in New York.
In the broad-based rally, Brazilian bonds outperformed, with cash bonds up as much as 2 points in price and five-year credit default swaps ending the day some 15bp tighter at 293bp.
Brazil’s 2023s, for example, ended the session at 87.0-87.5, while the 2045s were quoted at 87.5-88.0, according to a New York-based broker.
The afternoon rally also lifted corporate names, with Brazilian bank bonds enjoying some demand towards the close after selling off sharply on Tuesday.
“Some of the Brazilian banks and longer duration bonds got lifted,” said a corporate bond trader focusing on Brazil. “I saw buyers of Caixa, BNDES and Banco do Brasil.”
An almost four-dollar swing in Brent prices, which bounced back to US$56 a barrel, pushed oil-related credits like Venezuela and PDVSA higher by between half and three quarters of a point.
With Argentine bonds ending the day better bid, investors appear undeterred by the prospect of a standoff between the sovereign and Citigroup over the coupon payments on some Argentine-law bonds.
A source told Reuters on Wednesday that the country will not allow Citigroup to exit just its local custody business as it seeks to comply with a US court order banning it from processing payments on the local bonds.
President Cristina Fernandez has demanded that the US bank make the March 31 coupon payment and has threatened to take away Citigroup’s banking license if it refuses to do so.
New York-law Pars and Discounts ended the day half a point higher at 60.0-60.5 and 103.0-103.5 respectively, while the Boden 2015s were flat at 103.0-103.5.
Colombia Telecomunicaciones (ColTel), Colombia’s second-largest telecommunications company, has hired BBVA and HSBC as structuring advisors as well as joint bookrunners along with Citigroup and Credit Suisse to arrange a series of investor meetings in the US, Europe and Asia.
A US dollar-denominated 144A/Reg S hybrid bond transaction may follow. The issuer is rated BB/BB, while the hybrid bond is expected to be rated B+/B. ColTel is 70% owned by Spain’s Telefonica S.A. and 30% owned by the Republic of Colombia. Meetings kicked off this week and will continue until March 24.
The Republic of Peru (A3/BBB+/BBB+) has hired BBVA, Deutsche Bank and Morgan Stanley to arrange meetings with fixed-income investors. The sovereign wrapped up roadshows today in Boston.
Ecuador is expected to come to market with a new US dollar-denominated bond as soon as this week through lead Citigroup.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ by both S&P and Fitch, wrapped up investor meetings this week through leads Deutsche Bank and JP Morgan.
Mexican media company TV Azteca is expected to bring to market a rare project bond related to the development of the Andean country’s fiber optic network.
Reporting by Davide Scigliuzzo; Editing by Paul Kilby