Lat-Am spreads tighten; investors still ‘sitting on sidelines’; South Africa gets attention

By Christine Van Dusen

Atlanta, Feb. 25 – Emerging markets assets put in a mostly positive session on Thursday, with Latin American spreads unchanged to tighter, as investors watched China ahead of the G20 meeting in Shanghai.

Mexico’s five-year credit default swaps spreads were unchanged at 196 basis points, and Brazil’s closed at 452 basis points from 451 bps, but “the bid still feels firm,” a New York-based trader said.

Latin American high yield names were up on the day, with Venezuela’s 2027s moving to 39.75 from 38, PDVSA’s 2017s ending at 48.25 from 45 and Argentina’s Bonar 2024s at 108 from 107.25.

“Flows continue to see better buyers of EM paper, with the occasional seller here and there,” he said.

Overall, it still seemed as though “accounts are sitting on sidelines, ready to add rather then selling aggressively,” a trader said. “One way to tell is that is front end paper is less squeezed than before, in certain places.”

South Africa received some attention on Thursday after the finance minister said the Treasury would cut its growth forecast for 2016 to 0.9%, down from 1.7% in October.

In an attempt to target a fiscal deficit of 3.2% of gross domestic product in the 2016 to 2017 year, the sovereign is looking to issue $1 billion of bonds by the end of March.

© 2015 Prospect News.
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