NEW YORK, Aug 19 (IFR) - LatAm credits took another beating on Wednesday, as a rally in US Treasuries after the Fed’s minutes failed to offset concerns about growth in China as well as sputtering commodity prices.
Ten-year US Treasury yields fell back to around 2.12% after the minutes suggested the FOMC wanted more data on US growth and inflation before an “approaching” hike in rates.
The possibility of a delay in monetary tightening in the US, however, brought little comfort to investors looking at EM assets in Latin America.
“(LatAm high-grade credits) are trying to stage a bit of a bounce, but they are still weaker,” one US-based trader told IFR.
More volatility in Chinese stocks and another step down in crude prices served to heighten worries about the commodity exporting region.
Bonds issued by Brazilian state-owned oil company Petrobras were some 20bp wider on Wednesday, with the 2024s quoted at 585bp-580bp.
Meanwhile the bonds of Pacific Exploration and Production - formerly known as Pacific Rubiales - continue to sink, with its 2025s now trading in the mid to low 50s, another trader said.
Those securities were being spotted in the mid 60s in late June.
Venezuela was the happy outlier in the oil space Wednesday, with both PDVSA and the sovereign seeing their bonds hold up relatively well.
“Even today, Venezuela is not reacting that much to oil prices,” said Jorge Piedrahita, CEO of broker Torino Capital.
“The levels on many bonds are already around 31-33, which is lower than some estimates for recovery value. How low can you go?”
Peru’s new 12-year bond meanwhile was spotted a touch tighter at around 193bp after pricing Tuesday at a spread of 195bp over US Treasuries.
The timing for the bond sale came as a surprise, but the sovereign was seen taking a proactive view to move ahead of any Fed-induced volatility in September and heightened political risks during an election year in 2016.
“Other sovereigns may take the same position as Peru and try to pre-fund for next year and take on some liquidity in case conditions deteriorate,” one banker said. (Reporting by Paul Kilby; Editing by Marc Carnegie)