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06 August 2015 by lberuti

Yesterday, TITIM’s ( Telecom Italia Spa ) Brazilian subsidiary reported weak results, mainly due to a tough macroeconomic environment. And with mobile penetration rates now over 138% in the country, competition for subscribers will only get tougher. That put TITIM’s 5 year risk premium under a bit of pressure, and it widened by 3bps to 145.5bps. But the real casualty was PORTEL (Portugal Telecom), as retail investors, who had arguably little understanding of the structure under which PORTEL bonds trade since Oi bought the company, are finally realising that they are not Portuguese risk but in fact Brazilian risk, and have been selling them over the last few sessions. TITIM’s results appear to have been the catalyst for more aggressive selling because of the poor outlook for Brazil in general and this drove the bonds 5 to 8pts lower and the 5 risk premium CDS 3.875pts higher to 11.13%.