NEW YORK, March 20 (IFR) - An easing of outflows from EM debt funds, higher crude prices and a weaker dollar are all helping to lift prices in LatAm credit markets Friday.
“FX is the mover,” said a trader. “When you see a weaker dollar and higher Treasuries that helps all risk markets.”
Investors were finding some relief as EM currencies showed signs of steadying after several weeks of declines.
The Brazilian Real is off yesterday’s peak of 3.29 against the dollar and was trading at 3.24 earlier Friday. It is a similar story for the Mexican peso which dropped to 15.09 against the dollar after reaching 15.27 Thursday.
US Treasuries are also extending gains with the yield on the 10-year benchmark remaining below 2% at 1.94%, and the 30-year trading at 2.51%, its lowest level since early February.
Meanwhile, the oil space was benefiting from higher crude prices, helping bolster debt prices in oil rich Venezuela, where investors have been fretting about the government’s ability to meet bond payments.
“We are starting to sense that 2016 could be managed so that no default happens,” Jorge Piedrahita, CEO at Torino Capital, wrote to clients this morning. “We are a minority on such thoughts.”
This follows yesterday’s news that state-owned oil company PDVSA had clinched about US$10bn in financing from China, further helping to boost debt prices. Venezuela 2022s were being quoted this morning at 45.50-46.50, about one point higher.
Elsewhere in the oil sector, Brazil’s Petrobras was also moving higher on local reports that audited results could be released next month. The curve remains inverted, however, with the 3.875% 2016s trading at 737bp-672bp over Treasuries versus 590bp-580bp on the 6.25% 2024s.
Ecuador’s newly minted five-year 10.5% bond, meanwhile, was trading flat at 99.75-100.25 after being priced at par yesterday.
Meanwhile, helping sentiment further is data which show outflows out of EM bonds have slowed during the week ending March 18 to hit US$397m versus US$597.1m the prior week, according to UniCredit citing EPFR data.
Also while local currency funds continue to suffer the brunt of the redemptions with some US$509m fleeing that sector last week, the overall asset class is proving more resilient in other segments. Blended funds enjoyed US$142m inflows last week, while hard currency funds suffered only US$30m in outflows.
“The prospect of hikes in the US will create further upward pressure on yields, both through EM currency weakness and demand for higher yielding assets,” said the bank which expects further rotations into hard currency assets.
Colombia Telecomunicaciones (ColTel), Colombia’s second-largest telecommunications company, has hired BBVA and HSBC as structuring advisors as well as joint bookrunners along with Citigroup and Credit Suisse to arrange a series of investor meetings in the US, Europe and Asia.
A US dollar-denominated 144A/Reg S hybrid bond transaction may follow. The issuer is rated BB/BB, while the hybrid bond is expected to be rated B+/B. ColTel is 70% owned by Spain’s Telefonica S.A. and 30% owned by the Republic of Colombia. Meetings kicked off this week and will continue until March 24.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ by both S&P and Fitch, wrapped up investor meetings this week through leads Deutsche Bank and JP Morgan.
Mexican media company TV Azteca is expected to bring to market a rare project bond related to the development of the Andean country’s fiber optic network. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)