NEW YORK, Nov 13 (IFR) - Petrobras’s poor third-quarter results, weaker oil prices and reports that the Brazilian finance minister may step down sent the country’s bonds on another rollercoaster ride on Friday.
Petrobras bonds were off the intra-day low Friday afternoon but still as much as 1.5 points down on the day after the state-owned oil company posted a R$3.76bn loss in the third quarter.
A weaker exchange rate, lower oil prices and an ongoing corruption investigation have complicated management’s efforts to turn the company around.
Its 2024s were down about 1.5 points at 78.25-79.25.
“We have seen selling from retail investors and real money, but the Street has no incentive to take on Petrobras risk at this time of the year,” said a New York-based trader.
Price swings in Brazil’s debt markets have been exacerbated by local news reports that President Dilma Rousseff has decided to replace Finance Minister Joaquim Levy.
Brazil’s sovereign curve recovered some earlier losses but was about 1/2 to 3/4 point weaker on the day, with the 2025s quoted at around 87.35-88.10.
It is a similar story on the corporate side, with investors focusing on Petrobras’s poor numbers and troubles in the commodities sector, where crude prices extended losses again.
“On the corporate side, Levy’s departure is the least of our worries,” a second trader told IFR.
Expectations that the president will select former central bank governor Henrique Meirelles as Levy’s replacement has helped to support price.
Backed by former President Luiz Inacio Lula da Silva, Meirelles is thought to have a greater ability to implement the fiscal measures necessary to put the economy back on track.
“Meirelles would bring governability,” said the trader. “Brazil needs governability right now.”
This comes on the back of yet another week of outflows for emerging market debt funds, which saw close to US$2bn leave the asset class in the week ended November 11, according to UniCredit, citing EPFR data.
Yet while EM local currency and blended funds suffered combined outflows of about US$2.12bn, hard currency funds did enjoy marginal inflows of US$128.61m.
“Risk sentiment continues to deteriorate on the back of worries around global growth and higher interest rates, and we expect this to continue,” UniCredit said.
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 REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting by Paul Kilby; Editing by Marc Carnegie)