PEMEX bond spreads over the sovereign remain stable, although in a tightening mode. While bonds appeared to be under some pressure over the last couple of days, we think PEMEX bond prices are now in a consolidation phase, and some healthy profit-taking was due after the significant rally experienced since early October 2023. Although PEMEX bond spreads are close to their tightest levels, we still like the credit and remain comfortable with positions at the front end of the curve up to the 2032 maturities. Ongoing government support and the engagement of ESG initiatives should provide further backing for these bonds.
CFE bonds are trading at close to one-year tight spread levels. Given the current spread levels to the sovereign and poor liquidity, CFE bonds look less appealing in terms of relative value.
PETBRA 2033s spreads to the sovereign are at what we consider rich levels, trading at the tightest (c.21bp) having compressed c.27bp in a month and, while still higher than other pairs, the lack of liquidity of other bonds makes it a less reliable indicator. In general, we do not see PETBRA bond spread levels as appealing, and PETBRA might not be immune to the recent softness seen in other LatAm oil companies after the latest earnings announcements.
After trading at some of the widest spread levels in January, CDEL bond spreads versus Chile bonds seem to have stabilised and have seen some tightening over the past month. While we do not expect drastic spread tightening, we think the bonds at the belly of the curve with spreads of more than 85bp over the sovereign look attractive, with CDEL 36s as one such example.
ECOPET bonds have outperformed Colombia bonds, and we believe the stability of spreads offers a good opportunity for a pickup in yield over sovereign bonds. We also expect Colombia to tap the primary market at some point, which could drive some further spread tightening. In this context, we like ECOPET 31s, a low USD price bond with c.+90bp spread, and ECOPET 33s, which look cheap on the fitted curve.