11 de mayo de 2015 / 21:24 / en 3 años

LatAm credit markets remain resilient against US rate moves

NEW YORK, May 11 (IFR) - Latin American credit prices continued to hold their ground against yet another sell-off in the US Treasury markets where the yield on the 10-year benchmark gapped back to 2.26% today.

Investors have yet to turn their backs on the asset class, but traders are fearing prices could buckle should Treasuries suffer further volatility.

“People are worried that a back up in rates will put pressure on (LatAm credits) but so far nothing has happened,” said a New York based trader.

Prices on sovereign debt did take a hit on Monday, including Brazil 2025s, which were being bid as low as 98.50.

Investors are also beginning to fret about rate volatility, its possible knock-on effects to local currencies and what this means for Latin American credits holding dollar debt.

“Higher US rates are bad for the asset class, but the main impact will come through the FX transmission,” said an EM investor. “The dollar will appreciate more and that will deteriorate credit quality further.”

Prices on bonds issued by Brazilian oil company Petrobras also tumbled about one point to around 99.00 bid, though spreads were only marginally wider at around 418bp.

The opposite held true for some of the region’s higher yielding names, including beef company Minerva whose 2023s were up about 1/2 point at 102.50.

Elsewhere in the corporate space, Votorantim Cimentos’ new seven-year, euro-denominated bond was being bid at 99.77 or mid swaps plus 290bp after pricing last week at 98.542 or mid-swaps plus 310bp.

Meanwhile, the 9.75% 2018s issued by Brazilian cement company Cimento Tupi were drifting at around 33.50-35.50 following the issuer’s announcement late Friday that it would not pay a US$9m coupon payment due today. Fitch has downgraded the credit to C from CCC on the news.

Among sovereigns, Argentine debt prices had yet to budge following a motion filed by holdouts seeking pari passu injunctive relief against other bonds considered external indebtedness, including the Bonar 2024s.

Markets had been expecting such a move after the government successfully raised US$1.416bn through a tap of those instruments in late April. Reports that the government was considering another such issue, sent prices lower last week but Bonar 2024s were holding steady Monday at 98.50-99.00.

“The more (Argentina tries) to issue in local law, the more they are going to face legal challenges,” said Siobhan Morden, head of Latin America strategy at Jefferies.

“I don’t think the market wants any more issuance in the remaining month of the Kirchner administration. If there is a legal threat that will cause them to hesitate (from issuing) that will provide some natural stability.” (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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