LatAm primary quiet ahead of hoped for September reset; Petrobras active, flat to higher

By Rebecca Melvin

New York, Aug. 24 – Latin America’s primary market remained quiet with Brazil, Argentina and Mexico on the sidelines for the time being as market players watch for a key issuer to step up to show that there is a viable market, a New York-based market source said on Friday.

“All regions within Latin America are looking pretty quiet,” the source said, noting that the market has not seen a deal since the Dominican Republic priced $1.3 billion of 10-year notes at a 6% yield in early July.

Several deals had been on the new-issue calendar when currency troubles struck emerging markets in May, and after that only a handful of issuers were able to price a deal.

Brazil’s dollar bond primary market is frozen ahead of that country’s presidential election on Oct. 7, the market source said, and the existing curve is weakening. The “selloff style” is similar to what happened for Mexico in which bonds weakened for about a month heading into its July 1 election.

Meanwhile Argentina’s currency crisis has halted international bond sales for that nation. And there has been nothing priced for Mexico since May, the source said.

That being said, September is the second most popular month of the year to price a deal, so there may be some things in the works. January is the most popular month to price. The issuers that are likely to reopen the primary market include countries like Ecuador, Paraguay or others that are away from those that are sidelined, the market source said.

Meanwhile, the Central & Eastern Europe, Middle East and Africa has also faced a quieter than normal summer lull, but with Poland’s mBank having announced a roadshow for a planned offering of notes next week and Gulf Cooperation Council countries looking at the market, there was an expectation that the CEE/MEA region could reopen next week after the U.K. bank holiday on Monday.

The selloff in Brazil’s existing bonds was curtailed on Friday with the real modestly improved from Thursday. Meanwhile Petroleo Brasileiro SA bonds traded very actively on Friday amid reports that its Replan oil refinery, its largest in Brazil, was set to partially restart following a fire shut operations at the refinery on Monday.

Petrobras’ 5¾% notes due 2029 traded at 87 for a yield of 7.575% on Friday and as high as 89, which was flat to higher from Thursday.

Petrobras’ 6¼% notes due 2024 were also especially active and seen at 97 to 98.5, which was also flat to higher.

The Petrobras long-dated 7¼% notes due 2044 were moving up to 92.5 to 92.9 last from 91.75 earlier in the session, but still lower than the 94 to 95 area at which it traded prior to this last week.

In the broader markets, U.S. stocks rose with the S&P 500 stock index and Nasdaq closing at records. U.S. Federal Reserve Chairman Jerome Powell said in his Jackson Hole, Wyo., speech that the central bank was on course with its current strategy of gradual rate hikes and normalization of monetary policy, which is viewed as the appropriate stand given current strength in the U.S. economy and low unemployment.

For the week, the S&P 500 is up 0.9%, the Nasdaq gained 1.7%, and the Dow Jones industrial average rose 0.5%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.