South America

Bad news seems determined to afflict Brazil until the very end of the year as Joaquim Levy’s resignation on Friday sent bonds to new lows with much of the market in holiday mode.

For most observes it had already become a matter of time. Standard & Poor’s had already made Brazil a sub-investment grade borrower and both Fitch and Moody’s had Latin America’s largest sovereign on review for downgrade.

Good news from the US Federal Reserve — in the form of a more dovish rate announcement than some market participants had expected — brought a sanguine close to a turbulent week for credit derivatives and boosted equity markets, but only added to the pressure on emerging market countries and their currencies.

MTN investors are speculating that the huge yield available on Argentine peso bonds may be worth the risk of buying bonds denominated in a currency which is undergoing official devaluation.

MTN investors are speculating that the huge yield on Argentine peso bonds may be worth the risk.

Argentine energy company Medanito will wait until January to attempt its debut international bond issuance.

Brazilian sugar and ethanol producer Tonon Bioenergia has filed for bankruptcy after many months of battling low prices, and Standard & Poor’s is pessimistic on bondholders’ recovery chances.

Opposition supporters were rejoicing in Venezuela this week after their greatest electoral victory over Chavismo, but the bond market’s reaction was muted as oil plummeted to nearly seven year lows and the scale of the political and economic challenges that lie ahead loomed large.

Bolivia’s budget for 2016 includes a $1bn bond issue to finance the construction of hospitals, finance minister Luis Arce said at a press conference in the capital, La Paz.

Spreads on Chile’s sovereigns bonds tightened by 1bp across the curve on Tuesday as Latin America’s best rated country began a fixed income investor roadshow.

Brazil took a step closer to sub-investment grade status on Wednesday when Moody’s placed its Baa3 rating on review for downgrade.

For Venezuelan bonds to jump as much as four points on a day that oil prices reached seven year lows on Monday was surely a sign that something special had happened. But some analysts felt that such will be the impact of Sunday’s parliamentary election in Venezuela that the bonds should have rallied even further.