With the returns already in hand and aiming for new opportunities, Credicorp Capital has made changes to its Top Picks portfolio of Latin American fixed income. According to a report, three investment-grade bonds and three speculative-grade securities were replaced in the portfolio.
Investment-Grade Bonds
In the investment-grade segment, the firm removed the JBS 2053 bond, “after strong performance,” replacing it with the IFHBH 29 bond from the Peruvian conglomerate Intercorp. “We expect IFH to be supported by the gradual recovery of its subsidiaries and its recent outlook revision, consolidating its IG status,” the firm noted in the report.
For the mining portion, Credicorp replaced the Southern Copper 2035 bond with debt from Brazil’s Nexa Resources 2034.
“Southern is a strong credit but with little room for spread compression,” they explained, adding, “We do not foresee a short-term positive catalyst, as uncertainty persists around mining reforms in Mexico and the social approval of the Tia Maria project.” On the other hand, Nexa’s bond attracted attention “due to its attractive yield compared to peers and manageable risks, supported by a clear path of operational and financial improvements.”
Lastly, Credicorp Capital decided to swap the Suzano 2029 bond from the Brazilian pulp giant for the company’s 2047 bond. This bond, they noted, “offers better risk-adjusted yields relative to the BBB- curve.” They further highlighted their confidence in Suzano as it “enters the harvest phase of its Cerrado project.”
High-Yield Bonds
On the speculative-grade side, the financial firm decided to remove the 2032 bond of Chilean retailer Falabella. This decision, they explained, was due to the bond achieving its spread target relative to the Cencosud 2031 bond at approximately 50 basis points.
In its place, Credicorp added the 2028 bond of Peruvian company InRetail Consumer. “We believe the bond offers a good yield relative to Cencosud’s,” they explained.
Another change involved swapping the Minsur 2031 bond with the MRFGBZ 31 bond from Brazilian protein producer Marfrig Global Foods. This decision was based on the fact that the former “is trading relatively tight compared to BBB-rated names, considering its split rating limits flows despite its IG credit metrics.”
Additionally, they closed their overweight position in the Hunt Oil 2033 bond, “as its spread differential with the PLUSCM 36 has compressed to ~65 bps compared to the six-month average of ~75 bps.” For this reason, they decided to replace it with the BINTPE 30 bond from the Peruvian financial institution Interbank. “It again appears attractive compared to the BCP 30, offering an interesting yield for a relatively short duration to call,” they noted.
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