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segunda-feira, setembro 21, 2009

Our Mood for Today

Well, considering current market numbers and performance, market players are definitely taking a breath for future highs! The stock markets are presenting some correction -1% and even on the Credit Markets investors are taking profits after last week rally. Recent new issues are all loosing ground and yields are going high. Nevertheless that should be a good momentum to increase positions especially the ones that were out praying for good prices before any reallocation of their portfolios. In my opinion the market is turning on a daily basis in what it was in the past where the Fixed Income should present a regular yield (not what it was possible to get since November even for high grade names) and, to get better yields, investors should be able to tackle with higher risks (and also returns). In line with this view, on the Corporate Side, and considering the Brazilian Names we should not expect the High Grade Issuers paying more than 7% anymore and instead be able to accept the 2nd tier names to get better yields... Even Bradesco with a TIER 2 transaction will be able to pay around 6 ¾ at the end of its book building process, for a 10Y transaction (my opinion). This doesn't mean that we are not going to have buyers for the High Grade Names with lower risk and return... This is the big difference from the past market where Brazilian Names were considered something really risky, just considered for small part of a specific portfolio. Now things are different and, as mentioned a couple of times in our moods, New Comers are frequent and Real Money looking for alternatives for LONG TERM INVESTMENT are betting that Brazil and Brazilian Assets are one of the best options for them with the good perspectives and New Status of our nation... A Big Shift! Our goal in here is to help you on this NEW ERA, on this NEW NORMAL (as mentioned by Bill Gross - Managing Director of PIMCO, on its Monthly Investment Outlook), where Brazil should definitely be part of Investor's Portfolio Worldwide...

Regarding Politics in Brazil the PT party (Government Party) should be upset during today's trading session as it will be released another pool for the Presidential Election of 2010 where Dilma Roussef, Lula's Candidate, will appear on the 3rd place going down. Definitely Mr. Lula will have to work hard to transfer part of his popularity to Dilma Roussef aiming to revert the bad trend... On the other side Jose Serra (current São Paulo State Governor) continues on the 1st place and built its candidacy with several arrangements behind the scenes. We are increasing our coverage of the political world in here cause like the Interest Rate Market (that has priced some political factor on current premiums), the others should also present at least some volatility increase and we should be prepared and informed for it...

Analyzing each market now:

- Currency Market: The profit taking movement should also affect the BRL performance during today's trading session. However we uphold our call and recommend some LONG position on the BRL! Let's BUY BRL!!!!

- Interest Rate Market: Some market participants are considering some LONG position on some vertices after the recent rate hikes. I tend to agree with this alternative but just with a short term investment perspective.

- Stock Exchange Market: We expect some profit taking movement for today's trading session. Good moment to check the prices and opportunities to get in...

- Sovereign and Corporate Debt Market: As expected Bradesco has informed the price guidance of its NEW TIER 2 ISSUE. It is the 6 7/8 yield area. In my opinion that should reach at the end of the book building process the 6 ¾ yield even with the correction markets are presenting today after last week rally. New Issuers are welcome!!! Who would be the next? We keep our constructive bias for the corporate market during this month of new issues... Brazil 5Y CDS is trading around 121 bps (+6bps). BR 40 is trading around 159 SOT (+6bps).

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