Brazil pension reform stalls, leaving sovereigns lower; Vale redeems $1 billion 2019 bonds

By Paul A. Harris

Portland, Ore., Aug. 28 – Brazilian sovereigns were marked lower on Monday when news circulated that the government of President Michel Temer failed to get approval for a pension reform bill sent to the National Congress over the weekend, a market source said.

Brazil’s 5% notes due January 2045 were 90.89 bid, 91.39 offered, down 0.265 on the day.

It appears that chances pension reform will be passed this year are slim to none, the source said.

Elsewhere Brazil-based Vale SA announced it is tendering for up to $750 million of its 4 5/8% guaranteed notes due 2020.

Vale also exercised the make-whole call option on its $1 billion of 5 5/8% guaranteed notes due 2019 with the redemption date set for Sept. 28.

Citigroup, Credit Agricole, RBC and Scotia are the dealer managers.

Risk off

Higher beta Latin American emerging markets bonds were marked lower on Monday, a market source said.

Venezuela bonds across the curve were lower on the day, with the exceptions being the near end of the maturity curve, the source said, adding that the 2019, 2020 and 2034 maturities were unchanged.

Warnings over the weekend from high profile Wall Street asset managers that risky assets are overvalued do not appear to have eroded emerging markets prices, a trader said.

But the chorus is growing, the source added.

Jeff Gundlach, chief executive officer of DoubleLine Capital, and Ray Dalio, of Bridgewater Associates, warned over the weekend that emerging market bonds are yielding less than U.S. high-yield debt.

Those warnings come on the heels of last month’s note from Oaktree Capital’s Howard Marks, who called into question the wisdom of investors who piled into Argentina’s 7 1/8% senior notes due June 2117. The century bonds, which priced this past June in a $2.75 billion issue, were said to have played, Marks noted, to $9.75 billion of bids.

© 2015 Prospect News.
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