May 6, 2015 / 8:49 PM / in 3 years

LatAm credits end off intra-day highs

NEW YORK, May 6 (IFR) - Latin American credits barely managed to stay in positive territory at the end of a particularly negative session Wednesday for equities and US Treasuries.

Federal Reserve Chairwoman Janet Yellen warned early in the day about possible risks, including high stock valuations, but a back-up in rates seemed to have the most overall impact.

Although some LatAm credits were giving back gains by the end of the day, however, traders said the tone was generally positive for the region’s bonds.

“Generally the market was trading very well today,” said a sovereign bond trader in New York. “We had decent flows, but we are going out a bit weaker.”

Brazilian sovereign bonds were 3bp-5bp tighter in spreads, a touch less than the 5bp-7bp tightening seen earlier, but still outperforming Peru, Uruguay and Chile, which closed flat.

A new issue from tequila giant Jose Cuervo stole much of the spotlight in the corporate space, after a mix of emerging markets and crossover investors placed more than US$5bn in orders for the company’s debut US$500m 10-year issue.

The notes, which priced at a final spread of 165bp over Treasuries, tightened slightly in the secondary to end the day quoted at 161bp-167bp.

“If it had come at 175bp it would have performed even better,” one trading desk analyst told IFR.

“But I think fair value is around 150bp, so there is still a bit of juice.”

Elsewhere in the region, bonds of Colombia-focused exploration and production company Pacific Rubiales retraced somewhat after rallying as much as 13 points late Tuesday on news that Mexican conglomerate Alfa and Harbour Energy had agreed to buy the company.

Pacific Rubiales’s 2025s were last quoted at 83.5-85.0, down slightly from the 86.00-88.00 levels seen earlier on Wednesday.

“That’s not totally unexpected,” said the analyst. “They are still going to be a levered play in the oil space.”

PIPELINE

Thursday: Votorantim Cimentos (Baa3/BBB/BBB) with new EUR benchmark seven-year bond. Citi, DB, HSBC, Banco Votorantim, BB Securities, BAML, MUFG, Santander GBM. Investor meetings finish today in Amsterdam and Paris.

Possible this week: Chile (Aa3/AA-/A+) could raise up to US$1.26bn-equivalent. RFPs sent to banks in April. (Reporting by Davide Scigliuzzo)

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