NEW YORK, July 15 (IFR) - Brazilian credit spreads were inching wider on Wednesday as prices failed to keep up with a rally in US Treasuries, though traders continued to report a firm bid for the country’s bonds.
The 2024s issued by troubled state-owned oil company Petrobras were quoted at 433bp-423bp, while its Century bond was spotted at 515bp-510bp.
“We are 4-6bp wider but well bid,” said a New York-based trader.
The yield on the 10-year US Treasury shrunk to 2.35% in early afternoon trading as investors once again fretted about global growth prospects even as they braced for a US rate hike later this year.
However, regional currencies, including the Brazilian Real, have sunk against the dollar after Federal Reserve Chairwoman Janet Yellen indicated before Congress that the bank was set to kick off monetary tightening in coming months.
Meanwhile, investors have already priced in a Moody’s sovereign downgrade to Baa3, a notch above junk, as the agency kicked off meetings Wednesday with Brazilian government officials. But spreads could widen further should Moody’s threaten a demotion to junk territory by putting the sovereign on negative outlook.
Elsewhere, in the Brazilian corporate space, bonds issued by Oi tumbled about a point on Wednesday after Fitch cut the telco’s rating to BB from BB+ with a negative outlook. By early afternoon the company’s 2020s and 2022s were being quoted at 90.25-91.75 and 85.25-86.25, respectively.
As justification for the move, Fitch cited a tough operating environment, weak cash flow and high leverage.
While Oi’s recent sale of PT Portugal to Altice is credit positive, the agency sees any short-term deleveraging limited by a legal dispute over the shedding of its African assets.
In Mexico, meanwhile, bonds issued by metals processor Elementia were giving back some gains after a nice rally on the back of its recent IPO. The 2025s were being quoted at a mid-market price of 101.15, up from the 100.375 seen last week but off the recent high of 101.40.
The company raised about US$252m last week through the sale of a 26.46% stake - a move that Moody’s described as credit positive as proceeds are being used to pay down debt.
Debt to Ebitda is expected to drop to 2.7x from the 3.8x registered in March this year, according to Moody‘s.
America Movil (A2/A-/A) and Telesites (expected NR/BBB-/BBB-) have wrapped up investor meetings via Citigroup, Inbursa, BBVA and Santander.
The meetings were intended to discuss the new Operadora de Sites Mexicanos business and gauge interest for 144A/Reg S deals in Mexican pesos and/or USD.
Banco Santander Chile (Aa3/A/A+) has wrapped up meetings via Deutsche Bank and Santander to discuss opportunities in the domestic Chilean markets.
Jamaica, rated Caa2/B/B-, has wrapped up investor meetings via Citigroup. The meetings were described as a non-deal roadshow, but markets have been expecting the sovereign to raise funding to retire a PetroCaribe loan owed to Venezuela. (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)