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quinta-feira, janeiro 07, 2010

Today's Brief

Yesterday was a big début for the Brazilian Issuers on the International Capital Markets in 2010! BNDES, the quasi-sovereign Brazilian Issuer was the first one to tap the market with its 10Y issue. Demand reached almost USD 3 bi and around 200 accounts participated on the process with a huge concentration of the US investors (as usual). It was priced exactly at the price guidance level (a little tight but in line with BNDES pricing standards considering last issues). The secondary market should be not so strong because of that and instead present the same behavior of the last issue after the launch (BNDES19) but improving on the sequence...

Also Bicbanco, a focused middle market Brazilian Bank has announced its intention to issue a 3Y Bond during next week (road show starts tomorrow). They should succeed on this effort due to the lack of Brazilian Issues on this tenor, the good quality of the bank and market appetite. No price whispers until today but my particularly opinion is that something around the 6.25%/6.50% range would work and attract investors attention and orders to the deal. To be confirmed!

The third four-week moving average of its IPC for December (initially expected on December 29) registered an inflation of 0.17%, above our expectation (0.13%). The index didn't change from its previous reading. The deceleration in food inflation was not so intense as we expected, resulting in a higher figure.

The end-December reading has registered an inflation of 0.18%, slightly above our estimations (0.17%) and the third four-week moving average (0.17%). Food prices have continued to fall, a bigger deflation than it had a week earlier. Cloth prices have started to decelerate, a typical movement of this period of the year. Transport prices have been a source of upside pressure.

IBGE has announced its November index of industrial production. It came lower than market expectations even with the lower comparison base that is weak because the global financial crisis was already affecting Brazilian industry in November 2008. It came at -0.2% (we were expecting +0.5%). This indicator should affect mostly the Interest Rate market with a downside movement of the rates. To be confirmed...

Analyzing each market now:

- Currency Market: We expect some profit taking movement during this trading session (BRL depreciation) in line with the market tone for the day.

- Interest Rate Market: Taking into consideration current macro environment and also future expectations, especially after the PIM number just released, we reinforce our opinion that it's a good strategy to receive the JAN11 DI contract.

- Stock Exchange Market: We expect some profit taking movement during the trading session... Support /resistance levels are 70200 / 71400.

- Sovereign and Corporate Debt Market: As expected today the Philippines Government has announced the retap of their 20 and 34 issues. Market is really receptive for new issues! Come to the new issues party! Brazil 5Y CDS is trading around 116.5 bps (flat). BR 40 is trading around 122 (-2bps).

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