Primary hosts Eesti Energia, China Securities; Brazil, Petrobras deal with downgrades

By Christine Van Dusen

Atlanta, Sept. 10 – Estonia’s Eesti Energia AS and China Securities International Finance Holding Co. Ltd. were among the issuers to print new notes on Thursday, as Brazilian bonds came under pressure weakened and Turkish notes widened.

“We open with a flurry of selling and the Street putting out low offers,” a New York-based trader said.

Low-beta bonds from Latin America were off to a “weak start” on Thursday morning, with spreads moving out and Brazil suffering after its ratings downgrade, another New York-based trader said.

“Cash prices are down 25 cents to 50 cents, excluding Brazil,” he said. “Overall defensive tone, as equities are set to drop and screens are well offered.”

Brazil’s five-year credit default swaps spreads moved out to 391 basis points from 374 bps, he said, as cash bond prices hit new lows but did manage a bounce after the morning levels.

Said another trader, “Hopes are that markets will move on from this downgrade and take it as a Brazil-specific event rather than a hit against EM credit as an asset class.”

Brazil-based Petroleo Brasileiro SA (Petrobras) also got a downgrade, which pushed its spreads out 35 bps to 40 bps at the open on Thursday, another trader said. The company, which is embroiled in a corruption scandal, faces the possibility of moving down more notches.

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