24 de marzo de 2015 / 13:53 / en 3 años

Brazil tightens as LatAm credits extend gains

NEW YORK, March 24 (IFR) - Brazilian sovereign and corporate bonds continued to rebound on Tuesday after S&P affirmed the country’s Triple B minus rating yesterday, assuaging concerns of a near-term downgrade to junk.

“It is a reminder that the situation in Brazil is not that bad, and markets are liking that,” said Rodrigo Covian, a trader at Bulltick in Miami.

For now, investors are largely shrugging off the rating agency’s decision to also revise its outlook on state-controlled oil entity Petrobras’s Triple B minus rating to negative.

The move sets the credit on a path for another demotion to sub-investment grade following a similar move by Moody’s in February.

Explaining its decision, S&P cites expectations that Petrobras will see weaker cash flows and a more leveraged balance sheet this year and next.

“The ongoing corruption investigations not only squeezed financing of Petrobras’ investment plan, but also weakened its main contractors’ creditworthiness and slowed the construction of the oil rigs to ramp-up production,” the rating agency said.

Despite that, Petrobras bonds were another 10bp tighter this morning after a decent rally yesterday, with the 2016s, 2024s and 2044s at around 640bp, 530bp and 545bp, respectively.

While little has changed to improve the outcome of the corruption scandal that has racked the oil entity and other credits associated with it, investors have been bargain hunting and riding the price movement higher.

This has been helped by a reversal in the recent weakness of crude prices and currencies such as the Brazilian Real and the Mexican peso. The Real, for example, was back down at 3.1 against the dollar today after nearing 3.3 last week - a 10-year high.

“Those movements are helping optimism about LatAm,” said Covian. “Dealers are helping push prices higher as they are seeing demand from end clients and trying to position accordingly.”

Brazilian companies being investigated for alleged corruption at Petrobras were also enjoying a recovery in bond prices. Odebrecht’s 2042s were being quoted at 76.50 after touching 73.00 last week, while Braskem 2024s have climbed about five points over the last week to hit 95.00.

Elsewhere, Colombia’s 5% 2045s being quoted several points higher at 101.75-102.25 after being tapped at 99.366 yesterday.

The firm backdrop bodes well for new issues, including Colombian telco ColTel which has released initial price thoughts of mid to high 8s on a US dollar denominated non-call five hybrid perp. Books are now open as the borrower prepares to price a US$500m deal as early as Wednesday.


In Peru, Mexican media company TV Azteca is expected to bring to market a project bond related to the development of Peru’s fiber optic network as soon as this week. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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