Emerging market bonds declined in anticipation that General Motors and Ford Motor will be cut to junk, overwhelming the market for high-yield, high-risk securities. Should both companies lose their investment-grade credit ratings, they would add $80 billion to high-yield markets. The increase may force yields higher on other junk bonds as investors seek compensation for increased risk. Brazil’s benchmark bond due in 2040 was down $2.25 Thursday to $112.1, pushing its yield up to 9.77 percent.
Category: Daily Brief
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Pemex Cuts Exploration Investments
Mexican state-run oil giant Petroleos Mexicanos (Pemex) will cut exploration investments this year by 25 percent to $1.5 billion. The company expects to maintain investments in exploration within the range of $1.5 billion and $2.0 billion over the next few years. Pemex has 17.7 billion barrels of proven reserves.
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Uruguay Delays Bond Sale
Uruguay postponed a planned $300 million bond offering Thursday after emerging market bonds fell. The country started offering12-year securities Wednesday in its first debt sale since it conducted a $5.3 billion bond swap in 2003 that Standard & Poor’s called a default. Uruguay’s sovereign debt is rated B3 by Moody’s Investors Service and B by S&P, six and five levels below investment grade.
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Colombia Seeks Loans
Colombia is seeking loans of another $1.2 billion from the Inter American Development Bank (IADB). The highly-indebted country, which accounted for 12 percent of total lending approved by the IADB in 2004, has recently announced it would disburse $1.3 billion in emergency loans extended by the IADB in 2003. IADB president Enrique Iglesias has said that the bank plans to experiment in extending loans to Colombia in Colombian pesos.
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PDVSA Denies Supply Halt
Venezuela’s state-owned oil company Petroleos de Venezuela SA (PDVSA) suffered a failure in one of largest refineries in Venezuela but has not suspended fuel supplies to the United States. PDVSA has been in contact with its customers in the US, informing them that it was mulling different options to comply with its agreements, including utilizing a refinery on Curacao Island.
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CSN Buys Mine
Brazilian steelmaker CSN will pay Brascan Brasil R$100 million ($37 million) in cash and stock for Ersa, a tin mine and foundry in the Amazon state of Rondônia. CSN uses 3,600 tons of tin annually to make tin-coated sheet iron, one of the company’s highest-value products and plans to increase production capacity at the mine to 3,600 tons per year and output at the foundry to 4,800 tons per year by 2009.
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Pemex Issues Debt
Mexico’s state oil company Pemex auctioned a round of short-term bonds worth $44 million on the Mexico City stock exchange last week. The 28-day fixed-rate bonds pay a 9.78 percent fixed annual interest rate. Credit ratings agency Standard and Poor’s assigned its mxA-1+ rating to the issue, Fitch its F1+ (mex) rating and Moody’s its MX-1 rating.
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Dantas Charged
Daniel Dantas, former Citigroup manager of a $728 million fund in Brazil, was charged with racketeering and breach of confidentiality in connection with a Brazilian probe into whether he hired security firm Kroll to spy on the government and business rivals. The charges, all of which Dantas has denied to the police, are preliminary and must be confirmed by a Brazilian court.
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Petrobras Studies Pakistani Projects
Petrobras, Brazil’s state-controlled oil company, is studying offshore oil and natural gas exploration in Pakistan after company officials visited the country last week. The visit by Petrobras officials comes after Pakistan’s President Pervez Musharraf visited Brazilian President Luiz Inácio Lula da Silva in November.
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EFE Places Bonds
Chile’s state rail company EFE has placed roughly $100 million-worth of local currency bonds. The inflation-indexed 30-year bonds, which are guaranteed by the Chilean government, will finance part of the company’s $1 billion 2003-2005 investment plan. Fitch Ratings and Humphreys rated the bonds AAA. Demand for the bonds was 2.7 times the initial offer, with the final interest rate at 3.79%.