NEW YORK, March 10 (IFR) - Latin American credit was slipping alongside the rest of the emerging markets on Tuesday as fears over US rate hikes and an ongoing selloff in currencies continued to roil the asset class.
“It is all risk-off,” said a New York based trader. “EM currencies are weaker, and local rates are blowing out. We have come too far too fast and all real money (accounts) are looking to take profits at the same time.”
Brazilian credits once again were suffering the brunt of the sell-off. Uncertainty over the outcome of the Petrobras corruption scandal and doubts about the implementation of fiscal measures has prompted the market to take a hands off approach to the region’s largest economy.
The Brazilian Real continues to get punished alongside other EM currencies to trade at around 3.12 against the dollar, while the Mexican peso was being quoted at 15.5397 to the US dollar.
Some have hoped that a weaker currency will help the country’s flagging economy. Brazil’s Finance Minister Joaquim Levy however was quoted in O Globo newspaper saying that a rebound in economic growth would depend more on austerity measures than benefits generated by a sliding Real.
The 6.25% 2024s issued by Petrobras were about 10bp wider this morning at 525bp-515bp, while the sovereign’s 2025s had inched about a 1/4 of point lower to be bid at 93.87.
Weaker crude prices were also serving to further exacerbate downward price pressures in Venezuela, where President Nicolas Maduro called for more powers to counter the “imperialist threat” after the United States yesterday sanctioned officials from the oil-rich nation.
“In a response to Obama’s new sanctions, Maduro will request an ”Anti-Imperialist“ Enabling Law,” Jorge Piedrahita, CEO of broker Torino Capital wrote to clients this morning. “We think he needs an enabling law in case (his party) loses the upcoming congressional elections.”
According to Reuters, Brent was down 70 cents this morning to hit a two-week low of US$57.86 a barrel, while US crude has fallen below US$50 a barrel to US$49.60.
Venezuela’s 2022s, were starting the day about 50ct weaker at 47.25-48.25, while PDVSA’s 2017s were following a similar downward trajectory to be spotted at 62.75-63.25.
Yields on the 10-year US Treasury have fallen off Friday’s peak of 2.24% to hit 2.12%, while the 30-year benchmark has also dropped to 2.73% from the 2.839% seen at the end of last week.
Ecuador could return to the international capital markets with a new US dollar bond sale as soon as next week, as it seeks to plug a widening financing gap in the wake of falling oil prices.
Investor meetings, which began in London on Monday via Citigroup, will continue in Boston today and move to Los Angeles on Wednesday, San Francisco on Thursday and New York on Friday. The country is looking to raise US$1bn, one of the sources said.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ from both S&P and Fitch, has mandated Deutsche Bank and JP Morgan to organize a series of fixed-income investor meetings in Europe starting in London on Wednesday. The borrower will move on to Amsterdam on Thursday and Paris on Friday, and the following week it will meet investors in Frankfurt on March 16.
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.
Panama has 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)