11 de septiembre de 2015 / 15:55 / en 2 años

LATAM WRAP-Investors reassess after Brazil downgrade

NEW YORK, Sept 11 (IFR) - LatAm credit markets put in a mixed performance on Friday as investors reassessed their positions in the wake of S&P’s decision to downgrade Brazil to junk.

Brazil continues to be under pressure as markets brace for more cuts in the corporate space as well as the knock-on effects of forced selling among passive accounts.

Bonds of state-owned oil company Petrobras, also downgraded by S&P this week, were largely wider except at the long end, where short-covering was providing some support.

Benchmark Petrobras 2024s were quoted at 730bp-720bp, some 30bp wider on the day as accounts take measure of the consequences for a company that now carries two junk ratings.

“Petrobras still has to rely on the international markets, and for them the cost of funding will increase,” one trader told IFR. “They will have to adjust to this new reality.”

Barclays has already named Petrobras as one of several Brazilian credits likely to be dropped from its Global and US Aggregate indices.

That move is likely to force passive index investors to drop the name in coming weeks.

“Some people are moving out of Petrobras into (investment-grade oil companies) Ecopetrol and Pemex,” said a second trader.

Brazilian bank names such as Banco do Brasil, Bradesco and Itau - other names cited by Barclays that could be dropped from the Global Aggregate Index - were also under pressure.

Itau’s 2022s were down about half a point at 90.75-91.50, while Banco do Brasil’s 8.5% perps were also weaker, though at a wider bid/offer spread of 91.50-93.00.

Elsewhere in the region, though, debt prices were holding up fairly well after the pace of outflows from EM-dedicated bond funds slowed this week.

About US$851m exited the asset class in the week ended September 9, well below the US$2.4bn-plus outflow seen in each of the three prior weeks, said UniCredit, citing EPFR data.

This trend could continue in the short term if oil prices find a floor and the Fed decides to delay rate hikes this month, the bank said.

Against that backdrop, Chilean copper giant Codelco’s new 10-year bond inched tighter to be quoted at 251bp-246bp. It priced this week at 250bp.


Mexican real-estate investment trust Fibra Uno has wrapped up meetings with fixed-income investors this week through Bank of America, Credit Suisse, HSBC and Santander.

Mexican real-estate investment trust Terrafina has also finished meeting accounts as it markets a potential US$400m-$500m bond offering.

The borrower has mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-.

Both issuers could tap the market as soon as next week. (Reporting by Paul Kilby; Editing by Marc Carnegie)

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