NEW YORK, April 1 (IFR) - Bonds issued by Brazil’s embattled oil company Petrobras were rallying after the company clinched US$3.5bn in financing from the Chinese Development Bank and President Dilma Rousseff said in an interview with Bloomberg that audited results would be released by month’s end.
“It is risk on and it is all about Brazil,” said a New York based trader.
The short end of the Petrobras curve is starting the day some 40bp-50bp tighter, though some traders think that investors should take this opportunity to lock in profits.
“At these levels it is a sell,” the trader said.
Petrobras 2016s, 2024s and 2044s were respectively being quoted at 450bp, 485bp and 490bp, normalizing the slope of the curve.
Sovereign debt was also following suit as investors sought exposure to Brazilian country risk. Brazil’s 2025s were trading up at 98.50-99.00 after closing yesterday at 98.00, while five-year credit defaults swaps were being quoted some 7bp tighter at 276bp.
“We have seen demand for Brazilian risk,” said Klaus Spielkamp, head of fixed-income sales at Bulltick in Miami. “We are still far from solving the (Petrobras) problem, but this news is good for sentiment.”
Meanwhile, weaker-than-expected ADP job numbers have spurred a rally in the US Treasury market where the yield on the 10-year has sunk to 1.89%. That plus a jump in oil prices as Iran nuclear talks reach an impasse are helping to support debt prices in Latin America.
Elsewhere Argentina asset prices were recovering after a volatile trading day Tuesday following Clearstream’s decision to suspend settlement on any security in the Argentine market.
Since then, the clearing house has reinstated settlement and the trading bridge with Euroclear for all the country’s securities. The only the exception is the five series of local law instruments that have been included in US court judge Thomas Griesa’s injunction prohibiting debt payments unless holdout investors are made whole as well.
Local law Bonar 2024s were back up at 105.00-106.00 Wednesday after falling to around 104.50 yesterday.
Pacific Rubiales, the largest private oil producer in Colombia, has hired Bank of America Merrill Lynch, Citigroup and HSBC to arrange a series of fixed-income investor update meetings in the US, Europe and Latin America between April 8 and May 6.
The meetings will take place in London on April 8 and 9, Switzerland on April 10, New York on April 13 and 14, Boston on April 15, Santiago on April 30, Los Angeles on May 4 and Miami on May 6. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)