10 September 2015 by lberuti
Markets were in consolidation mode today after their recent positive run. The defensive tone was set during the second part of the US session yesterday and overnight in Asia. It was compounded by the downgrade of Brazil to junk status (BB+ with a negative outlook still) by S&P, not only for all the names with sizeable exposure to this country but also for companies which do business in Latin American. The effect was broad-based. Brazil’s 5 year risk premium was first in line (19.5bps wider at 387.5bps), and both financials and non-financials corporates suffered equally. The most impacted were SANTAN ( Banco Santander SA ) 7.5bps wider at 119.5bps, PORTEL (Portugal Telecom) 2pts upfront wider at 19.75pts + 500bps running, and RALFP ( Rallye SA ) 60bps wider at 545bps. That Latam related cohort represents a good portion of the red boxes (ie today’s laggards) in the above grapple.