NEW YORK, Oct 2 (IFR) - The prospects of a delay in US rate hikes spurred buying across LatAm credit markets on Friday after US payroll data came in lower than expected.
The market initially took a knee-jerk tumble as the weak employment number raised doubts about the strength of the US economy and fueled fears about global growth, and in turn commodity prices.
But bond prices were quick to rebound on expectations that the Fed is now unlikely to tighten monetary policy until next year, possibly opening a window for borrowers sitting on the sidelines.
“We have seen nothing but customer buying on all things LatAm,” said a New York-based trader. “Now that a Fed hike is off the table (for the immediate future) that is one less thing to worry about.”
EM dedicated buyers were quickly followed by real money accounts who took the opportunity to add exposure to LatAm, though only among defensive names.
Chilean telco Entel, Colombian quasi sovereign utility EEB and Mexican tortilla manufacturer Gruma were all being lifted late morning. Gruma’s 2024s were up about 75ct at 105.00, while EEB’s 2021s were about 3/8s of a point stronger at 103.50.
Bonds issued by Mexico telco Axtel have also rallied about 10 points on news that conglomerate Alfa would buy a majority stake in the company.
Axtel 2020s were being quoted early afternoon at 101.50-103.50 after closing yesterday at 92, according to another trader.
The announcement, however, crushed hopes that Alfa would return to the negotiating table to buy a controlling stake in troubled E&P credit Pacific Exploration, whose bonds fell about one point on Friday.
Its 2019s were being quoted at 36.50-37.50, while the 2025s were being spotted at 35-36.
Buying momentum in the broader market only added to the recent rally enjoyed by bonds issued by Brazilian oil company Petrobras, which this week made an unexpected hike to domestic fuel prices.
Optimism over Brazil has also been helped by President Dilma Rousseff’s reshuffling of her cabinet to include other parties. The move is seen as a way to reduce the risk of the president’s impeachment and is likely to ease the passage of fiscal measures.
“This is significant as it opens the door for Brazil to start cleaning up a bit,” said the first trader. “Dilma is conceding power to gain effectiveness.”
The sovereign’s five-year CDS was trading Friday at 464bp today, down from the 533bp seen earlier this week, according to Thomson Reuters data.
Mexico’s state-owned Bancomext wrapped up roadshows last week through Bank of America Merrill Lynch and HSBC to arrange meetings with fixed-income investors ahead of a potential US dollar-denominated 144A/Reg S bond sale.
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican real-estate investment trust Fibra Uno has completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)