NEW YORK, May 23 (IFR) - Brazilian sovereign debt was weaker on Monday following reports that the new planning minister had tried to stall the corruption investigation at state-controlled oil company Petrobras.
Minister Romero Juca said he would not resign over the reports, but the news gave investors pause after a burst of optimism over the new government of President Michel Temer.
“It is not good news for the new regime,” said a New York-based trader.
Brazil five-year CDS widened about 11bp in early morning trading to around 355bp-361bp, while the sovereign’s 2026s were down about a point at 101.00-101.75, according to traders.
Sovereign debt was underperforming a US$6.75bn deal priced last week by Petrobras, which saw its bonds sink last week following complaints about tight pricing on its 10-year.
The 10-year 2026s were down just 15 cents at 95.10-95.60, but still well below a reoffer price of 98.374. The 2021s were being quoted at 98.60-98.90 versus a reoffer of 99.002.
Temer this month replaced Dilma Rousseff, who is undergoing an impeachment trial.
Temer has won praise for appointing a market-friendly cabinet, including former banker and ex-central bank chief Henrique Meirelles as finance minister.
Juca’s post as planning minister is particularly important to investors, given that he is in charge of overseeing Brazil’s budget. (Reporting by Paul Kilby; Editing by Marc Carnegie)