Petrobras, Vale Underperform in Quiet Market

Brazilian corporates including Petrobras and Vale extended losses on Tuesday, as investors sought to lock in profits after the recent rally in Latin American credits.

 

"As far as we understand, people are just hitting bids and getting out of stuff that had rallied a lot," said a corporate bond trader in New York.

 

Bonds of state-run oil company Petrobras were ending some 16bp-17bp wider, with the 2024s and 2044s quoted at spreads of 424bp-419bp and 460bp-455bp respectively, the trader said.

 

The curve of miner Vale was also underperforming after a strong rally recently, with the 2036s closing some 20bp wider at 405bp-399bp and the 2022s last quoted at 272bp-266bp.

 

"After being on fire, (Vale) finally came off," said the trader. "I think it was way too tight and had rallied too fast with iron ore. Finally some supply came."

 

Sovereign credits generally held steady in price and were closing tighter in spreads, given the widening of US Treasuries. The 10-year was quoted at 1.98%, or 6bp wider on the day.

 

"Sovereigns are holding in okay today, with low-beta (credits) outperforming the move in Treasuries," said a sovereign bond trader in New York.

 

Venezuela appeared to cement earlier losses, with its 2022s poised to end the session more than a point lower at around 53.5 mid-market.

 

Argentine bonds also underperformed but contained losses, with Discounts and Bonar 2024s ending about a quarter of a point lower at 103.00 and 104.15 respectively, the trader said.

 

In primary markets, last week's release of audited financial statements by Petrobras has reignited hopes the Brazilian sovereign will soon reopen the market with a new US dollar bond.

 

The potential transaction, which one syndicate official speculated could materialize as soon as next week, would provide a key benchmark for corporate and financial issuers that have been effectively shut out of the market since late 2014.

 

"There are several corporates that need to come (to market) this year, but the sovereign is going to be the one to lead off," said the banker. "They need to do something that is a statement and set a new benchmark."

 

Elsewhere in the region, Uruguay's ACI Airport Sudamerica has priced a US$200m amortizing bond maturing in 2032 at the final yield of 7.25%. The notes will have an average life of 12 years.

 

Banco de los Trabajadores (Bantrab) is out with guidance of 10.50% area on a new US$100m 10-year Tier 2 subordinated bond ahead of expected pricing on Wednesday.

 

The Guatemalan bank, which focuses on payroll-lending to public sector employees, wrapped up roadshows last week through Deutsche Bank. The bank has corporate ratings of Ba3/BB-, while the bond is expected to be rated B2/B+.

 

JB y Compania SA de CV (Jose Cuervo) will start fixed-income investor meetings this week through Bank of America Merrill Lynch and Citigroup as it seeks to market a possible senior unsecured US dollar bond.

 

The borrower will be in London on Wednesday, in Boston on Thursday and in Los Angeles on Friday. It will head to Chicago on May 4 and New York at May 5. The company, rated BBB/BBB by S&P and Fitch, is a global spirits company and the largest tequila producer in the world.

 

Banco Latinoamericano de Comercio Exterior (Bladex), a Panama-based trade bank, has kicked off fixed-income investor meetings via Bank of America Merrill Lynch and Citigroup.

 

The borrower, rated Baa2/BBB/BBB+, was in Switzerland and Boston on Tuesday, and will visit New York and Philadelphia on Wednesday.

 

Pacific Rubiales, the largest private oil producer in Colombia, has kicked off investor meetings through Bank of America Merrill Lynch, Citigroup and HSBC. The company heads to Santiago on April 30, Los Angeles on May 4 and Miami on May 6.