NEW YORK, Feb 27 (IFR) - LatAm credit markets enjoyed another strong start on Friday with the exception of the Brazilian sovereign, which continues to lag as investors fret about the fallout from the Petrobras corruption scandal.
“Credit feels good,” said a New York based trader. “Weak Chigago manufacturing data has created a bid for Treasuries and that has created a bid for high grade LatAm.”
Successful deals from Mexico and cement producer Cemex bode well for what is expected to be a busier month in the primary markets, where largely sovereign and quasi sovereign credits have been active.
With earnings season in full swing, several companies should soon be ready to move forward with bond trades, say bankers.
Cemex new USD 2025 was trading up at 100.75-101.00 this morning after being priced at 99.98 to yield 6.125%. This comes despite a 60bp tightening from initial price talk yesterday.
The company’s euro-denominated eight-year non-call four was also advancing to be quoted at 100.50-100.70 versus a reoffer of par.
Meanwhile, Mexico, which also returned to the euro market yesterday, was watching its new 2024s and 2045s inching higher to hit 99.95-100.25 and 98.95-99.40 after pricing at 99.486 and 98.199, respectively.
Brazilian corporates remain well bid despite Moody’s demotion of oil entity Petrobras to junk last week through a double-notch downgrade to Ba2.
Bonds issued by Intercement, which is controlled by Camargo Correa - one of the companies embroiled in the Petrobras corruption scandal, has enjoyed a multi-point leap with its 2024s trading at 77.00 this morning versus 71.00 a week ago, said another trader.
The Brazilian sovereign, however, continues to lag amid worries about a downgrade in the wake of Moody’s aggressive move on Petrobras.
“Moody’s was very aggressive,” said a senior banker in Sao Paulo. “This is an indication of the country’s perspective on the country as well. I wouldn’t be surprised if they downgrade the sovereign to Baa3.”
Pessimism over the country’s prospects this year have been reflected in five-year CDS levels which were about 10bp wider on the week at around 250bp, at a time when most credit spreads have tightened.
“The Brazilian sovereign is struggling as no-one knows what the bailout for Petrobras will cost and what the legal challenges means for Brazil,” said the second trader.
Mexican telco America Movil is meeting investors in Europe and the US this week as it seeks to market a global peso trade through BBVA, Citigroup, Credit Suisse, Deutsche Bank, HSBC and Morgan Stanley. Meetings will wrap up on Friday.
Mexican media company TV Azteca is bringing to market a rare project bond related to the development of the Andean country’s fiber optic network.
Costa Rica has chosen Deutsche Bank and HSBC as lead managers on an up to US$1bn international bond sale. Panama filed with the SEC to sell up to US$3.04bn in debt, raising expectations that the sovereign could soon come to the international bond market. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)