LatAm spreads widen in risk-off session

Tue May 26, 2015 3:47pm EDT
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By Paul Kilby

NEW YORK, May 26 (IFR) - Latin American credits were ending the day wider in spread terms on Tuesday as tumbling stocks and weaker commodity prices weighed on sentiment.

With US equity markets blinking red today, investors were largely in risk-off mode in Latin America, making for a quiet session in the secondary and primary markets following the long Memorial Day weekend in the US.

"Investors have cash, but this isn't a market you go out in and buy credits at tight valuations," said a banker. "If you feel that markets could drop from a rate hike, it feels expensive."

A rallying dollar may have brought some support to the US Treasury market, which saw yields on the 10-year fall back to around 2.13%, but it also left commodities on the back foot and dampened sentiment toward the region.

Oil was particularly hard hit with Brent and US crude slipping a good 3%, further pressured by expectations of increased supply.

Bonds issued by Pacific Rubiales continue to suffer price swings following a bounce last week on news that Mexican conglomerate Alfa and Harbour Energy would acquire the embattled oil company.

The company's 5.625% 2025s were back down at 83.00-84.00 Tuesday after hitting 86.00 last Thursday on the acquisition announcement amid good two-way flow.

Investors are in two minds whether to reduce exposure to a credit that has taken a beating this year, or hold it for further upside once Alfa takes over the company.   Continued...