Fwd: BRL Trade Idea
The spread between Brazilian Government yields and =etrobras has blown out from 100bps in June '15 to around =00bps today for their USD bonds. Our view is that the government =ill backstop Petrobras and will not allow it to default on its debt (Govt net reserves = $200bIn ; Petrobras debt notional = =105Bln). We think it makes sense to play for the spread to compress =ack to 300-400bps.
We can execute this through a long PETBRA position =nd buying protection on 5 yr BRL CDS to reduce risk. Details below.
- Spread =rade - CDS leg reduces risk in first option
Buy Petrobras bonds are yielding —10%
Buy Brazil CDS costs 3.96%
can you please provide pricing on the =ollowing:
Buy
Buy CDS Protection
Bond:
PETBRA 5%-01/27/21
Contract:
Brazil 5yr CDS
Issuer:
PETROBRAS GLOBAL FINANCE
Underlying Issuer:
Federative =epublic of Brazil
ISIN:
US71645WAR25
Maturity:
06/20/21
Ratings:
B3/B+/BB+
Coupon:
100 bps
Ranking:
Sr Unsecured
Spread:
396 bps
when sent to brad pricing was 83 and spread 396 currently via vahe below price is 82 and spread 380 x =85 please advise thank =ou
Richard Kahn
HBRK Associates Inc.
575 Lexington =venue 4th Floor
New York, NY 10022
tel =12-971-1306
fax 646-350-0954
cell =17-414-7584