Katana allows users to find curve trades for specific issuers in the news. In just a few clicks, users can see a list of market neutral ideas for a particular issuer.

We wanted to highlight PEMEX today because of the optimistic forecast for oil production (1.857m barrels per day in 2021) and prices ( $42.10) in the 2021 Mexican budget.


A spread difference of 113 basis points puts the PEMEX 4.875% 2024's and PEMEX 5.375% 2022's almost 1 standard deviation away (Z-score of .92) from the mean of 47 basis points. If the spread difference reverts back to the mean, then this trade would pick up 67 basis points.

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As the Zspread chart shows below the PEMEX 22's have been tightening at faster pace than the PEMEX 24's since mid June. The beginning of the dislocation trend was on June 15, 2020 when the spread difference was -13.

Republic of El Salvador 7.125% 2050 bonds (ELSALV 50's, B-) are lagging behind Republic of Costa Rica 7% 2044 bonds (COSTAR 44's, B) tightening trend.

The spread difference between the two bonds has reached 88bps against an average of 16bps for the last 12 months (2.1 standard deviations).

The credit spread between Banco Safra S.A. 4 1/8 2023 bonds (BANSAF 23's, BB) and Caixa Economica Federal 3 1/2 2022 bonds (CAIXBR 22's, BB-) has been on a widening trend.

The spread difference between the Brazilian banks, which has been 32bps on average in the last 12 months, is currently at 92bps (1.8 standard deviations). Holders of CAIXBR could increase their carry from 164bps to 256bps for a 3-month extension in maturity and 1 notch improvement in credit rating.

Spread widening in Empresa Electrica Angamos S.A. 4 7/8 2029 bonds (AESGEN 29's, USP3713QAA50,BBB-) from 290-305bps in August to 361bps today diverges from the trend for similar bonds across the region.

Katana highlights the dislocation against Sociedad Quimica y Minera de Chile S.A. 3 5/8 2023 bonds (SQM 23's, USP8718AAF32, BBB+) where the spread difference has increased to the highest in the last 12-month. At 227bps, this is 2.5 standard deviations from the mean of 131bps.

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Sharp spread move in Petrobras Global Finance B.V. 6 1/8 2022 bonds (PETBRA 22's, BB-) from 150-200bps to 66bps.

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Katana identifies the largest dislocation against Ecopetrol S.A. 5/8 2023 bonds (ECOPET 23's, BBB-).

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While ECOPET 23'S have traded 23bps above PETBRA 22's in the last year, the difference is currently 132bps (2.1 standard deviations).

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Dislocation in short-dated corporates in Peru

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InRetail Pharma S.A. 5 3/8 2023 bonds (RETAIL 23's, BB+) rapid tightening during September makes them look expensive against other issuers in LatAM.

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Katana identifies one of the largest dislocation in the credit spread between Nexa Resources Peru S.A. 4 5/8 2023 bonds (MILPOC 23's, BBB-) and the RETAIL 23's.

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While the difference has been 38bps on average in the last 12 months, it is currently 198bps (2.4 standard deviations).

The spread between United Mexican States 8 3/10 2031 bonds (MEX 31's, BBB+) and Federative Republic fo Brazil 6% 2026 (BRAZIL 26's, BB) has been opening up from the LTM average of 2bps in early July to 47bps currently (2 standard deviations).

Both z-spreads reached 400bps at the peak of the sell-off in late April and since then have been on a downward trend. In the last 2 months, the BRAZIL 26's have tightened from 300bps to 215bps while the MEX 31's are at 261bps.

The z-spread difference between Natura Cosmeticos 5 3/8 2023 bonds (NATURA 23's, BB-) and Minerva Luxembourg 6 1/2 2026 (BEEFBZ 26's, BB-) has jumped from -90bps to 75bps (1.76 standard deviations) since the beginning of September.

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While the credit spread on BEEFBZ has decreased by 85bps, the credit spread on NATURA has widened by 80bps.

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In the last 12 months, the  difference in the the credit spread of these Brazilian Consumer Goods companies has been -83bps on average and was above the current level only at the peak of the crisis (between mid-March and mid-April).

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Katana reveals a dislocation in the credit spread between BBVA Colombia SA 4 7/8 2025 bonds (BANGAN 25's, BB+) and BBVA Banco Continental 5 1/4 2029 (BCOCPE 29's, BBB-). The spread between BBVA’s Colombian subsidiary and the Peruvian one oscillated between 0 and 40bps before the general widening begun in March and traded in a wider range of 10-100bps between March and June.

Since early July the spread difference has been on a widening trajectory and is currently at 109bps (2.1 standard deviations from the annual average).

With 50bps of tightening in the last 2 weeks, Alpek 4 1/2 2022 bonds (ALPEKA, BBB-) looks expensive against Braskem 3 1/2 2023 (BRASKM 23's, BB+). The spread difference, which has been 7bps on average for the lat 12 months is now at 69bps (1.9 standard deviations). It has only been this high twice this year and was corrected within days.

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Continued tightening in Mexico 4% 2023 bonds (MEX 23's, BBB+) make them look expensive against other LatAM sovereign issuers.

Katana's algorithm identified several sovereign alternatives for the MEX 23's.

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Katana shows the largest dislocations against Colombia. The Colombia 2 5/8 2023 bonds (COLOM 23's, BBB-) currently offer a z-spread of 116bps while Mex 23's have tightened to 65bps. The difference of 51bps or more has been observed twice in the last 12 months and reverted within days. The average difference has been 14bps.

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For holders of MEX 23's looking to extend duration, the Colombia 4 1/2 2029 bonds (COLOM 29's, BBB-) offer an unprecedented 148bps against an average for the year of 83bps.

The 71bps spread difference between Tencent Holdings 4.525% 2049 and 3.595% 2028 bonds are at a level not seen since March 11th 2020.

71bps is 2.29 standard deviations from a mean of 41bps.

The 28's have been in a tightening trend thru July and August while the 49's have stabilized in August and remain in the 190 area.

The Republic of Colombia 4.5% 2029's look attractive as a swap alternative versus several LaTAM sovereign peers.

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The dislocation versus the PARGUY 4.7% 2027's are notable due to Republic of Colombia's higher credit rating and the difference in spread.

Beginning in late July the PARGUY 4.7% 27's tightened from 224bps to 174bps while the COLOM 4.5% 29's only tightened from 233bps to 219bps. The dislocation offers an opportunity for PARGUY 4.7% 27 holders to take profit on the tightening trend and swap into the COLOM 4.5% 29's.

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The z-spread on Electrobras 5 3/4 2021 bonds (ELEBRA 21s, BB-) has almost doubled since the start of the week, from 175bps to 335bps, which makes them relatively cheap against multiple other bonds in the region. The largest dislocation is against the Petrobras 6 1/8 2022 bonds (PETBRA 22s, BB-), where the z-spread difference has jumped to 189bps from an average of 32bps in the last twelve months (1.44 standard deviations).

The tightening in Republic of Honduras 6.25% 2027 bonds (HONDUR 27s, B+) from 450bps in mid-July to 354bps now makes them look expensive relative to other sovereign issuers in Latam.
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The biggest dislocation is against Republic of Trinidad and Tobago 4.375% 2024 bonds (TRITOB 24s, BB+), where the spread difference has narrowed from an average of -134bps to -36bps (2.16 standard deviations). TRITOB 24s being 3 years shorter and rated 3 notches higher, this is a defensive trade to increase credit quality and reduce duration at a low cost.

Holders of the HONDUR 27s looking to pick up spread could alternatively switch to Dominican Republic 5% 2025 bonds (DOMREP 25s, BB-). Two years shorter and 1 notch better rated, DOMREP 25s currently offer a pick up of 51bps against an average of -14bps (1.21 standard deviations).