LATAM WRAP-Better market tone as select Brazil names enjoy bids
By Paul Kilby
NEW YORK, Sept 16 (IFR) - Investors were actively adding risk and searching for bargains among Brazilian corporate bonds, helping the overall tone in the Latin American credit markets on Wednesday.
Traders were attributing the better tone to short covering and the very cheap prices on offer in a market that has sunk substantially following S&P's decision last week to downgrade both the Brazilian sovereign and oil company Petrobras to junk.
"There are some buyers of risk for the first time in quite some time in Brazil," said a New York based trader.
Miner Vale, banks and construction company Odebrecht were enjoying a bid as bargain hunters emerged. The latter's long end has rallied a good five points over the last week, with its 2042s being bid today at around 66.50.
Despite the arrest of its CEO on corruption charges earlier this year, Odebrecht remains a favorite among dedicated accounts who like the construction company's strong balance sheet and its diverse geographic portfolio.
Traders expressed hope that any fallout from the Petrobras kickback scandal will fall firmly with individuals involved rather than the companies they run.
Petrobras bonds were under pressure amid talk that high-grade passive index players were cutting exposure to a credit that now carries two junk ratings.
Meanwhile, in the oil space, Pacific Exploration - the E&P company formerly known as Pacific Rubiales - received another blow on Wednesday when Moody's downgraded it by three notches to B3 with a negative outlook. Continued...