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Dislocation in LatAm utilities

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Dislocation in LatAm utilities

Dislocation in LatAm utilities

September 22, 2020
BUY

PROMIG 3.75% 2029

USP7922TAA7Q
SELL

TRANSM 4.375% 2023

USP3083SAC90

Related reports:

The difference in the z-spread between Promigas S.A. E.S.P. 3 3/4 2029 bonds (PROMIG 29's, BBB-) and Consorcio Transmantaro S.A. 4 3/8 2023 bonds (TRANSM 23's, BBB) has increased to the highest level in the last 12 months. At 186bps, the spread between the 2 utilities is at 2.4 standard deviations from the yearly average of 96bps.

Holders of TRANSM 23's can look at the opportunity to take profits on the recent tightening from 190bps to 130bps since the beginning of September and switch to the longer dated PROMIG 29's at 315bps.

A Trader's View

Katana Labs
,
July 8, 2020

HCOB'22 vs SOCGEN '22 - 08.07.20

Katana Labs
,
June 25, 2020

European Financials 25.06.20

Trade ideas

Spread Pick-up with Rating Improvement in Brazilian Corporates

Spread Pick-up with Rating Improvement in Brazilian Corporates

October 26, 2020
BUY

AEGEBZ 5 3/4 10/10/2024

USP01014AA03
SELL

PETBRA 6 1/4 17/03/2024

US71647NAM11

Related reports:

The difference in z-spread between Aegea Finance S.a r.l. 5 3/4 2024 bonds (AEGEBZ 24's, BB) and Petrobras Global Finance B.V. 6 1/4 2024 bonds (PETBRA 24's, BB-) is at the highest level in the last 12 months (excluding 2 days at the peak of the March/April sell-off, when both credits traded at over 750bps). While AEGEBZ 24's have traded 127bps over PEBTRA 24's on average, the difference has increased to 222bps (2.1 standard deviations).

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Dislocation in Costa Rica 2043's

Dislocation in Costa Rica 2043's

October 23, 2020
BUY

COSTAR 5 5/8 30/04/2043

USP3699PGF82
SELL

JAMAN 8 0 15/03/2039

US470160AV46

Related reports:

Widening in Republic of Costa Rica 5 5/8 2043 bonds (COSTAR 43's, B) of c.100bps over the last 4 weeks contrasts the general tightening trend for peers.

Katana highlights the dislocation against Jamaica 8% 2039 bonds (JAMAN 39's, B+) among the most significant. The spread difference peaked at 330bps from a yearly average of 174bps and has started reverting in the last 3 days. Currently at 278bps, it is 2.9 standard deviations from the mean.

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Rumo Luxembourg Curve Dislocation

Rumo Luxembourg Curve Dislocation

October 22, 2020
BUY

RAILBZ 5 7/8 18/01/2025

USL79090AB95
SELL

RAILBZ 7 3/8 09/02/2024

USL79090AA13

Related reports:

The z-spread of Rumo Luxembourg 7 3/8 2024 bonds (RAILBZ 24's, BB) has narrowed by over 150bps during October while the spread of the 5 7/8 2025 bonds (RAILBZ 25's, BB) has remained unchanged. The spread difference is currently at 153bps against an average for the last 12 months of 11bps (2 standard deviations).

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Relative value opportunity in Chilean corporates

Relative value opportunity in Chilean corporates

October 19, 2020
BUY

ENELGX 4.25% 2024

US29246RAA14
SELL

ANDINA 5% 2023

USP3697UAD02

Related reports:

The difference in z-spread between Enel Generacion Chile S.A. 4 1/4 2024 bonds (ENELGX 24's, A-) and Embotelladora Andina S.A. 5% 2023 bonds (ANDINA 23's, BBB+) is at the highest level in the last 12 months (excluding a few days of extreme volatility at the peak of the March/April sell-off).

Currently at 52bps, the difference is 1.97 standard deviations from the annual average of 1bp. Holders of ANDINA 23's can increase their spread carry from 84bps to 136bps by switching to ENELGX 24's, for a 6-month maturity extension and 1-notch rating improvement.

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GE EUR Lagging in Tightening Trend

GE EUR Lagging in Tightening Trend

October 16, 2020
BUY

GE 1.875% 2027

XS1238902057
SELL

LYB 1.625% 2031

XS2052313827

Related reports:

General Electric Company 1 7/8 2027 bonds (GE 27's, BBB+) have been tightening at a slower pace than its peers.Katana identifies 133 relative value trades where GE bonds look cheap at current spread levels.

One of the largest dislocations is against FLY International Finance II B.V. 1 5/8 2031 bonds (LYB 31's, BBB). GE 27's traded under LYB 31's until mid-May when both bonds traded at 280bps. Since then, while the z-spread of LYB 31's has narrowed to 131bps, GE 27's still pay 191bps, being more than 4 years shorter and 1 notch better rated.

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These Yankees are still playing ball (probably bc they are Reverse Yankees, not the NY Yankees)

These Yankees are still playing ball (probably bc they are Reverse Yankees, not the NY Yankees)

October 14, 2020
BUY

F 3.021% 2024

XS1959498160
SELL

GM 1.694% 2025

XS1792505866

Related reports:

The credit spread difference between Ford Motor Credit Company LLC 3 21/1000 2024 bonds (F 24's, BB+) and General Motors Financial Company, Inc. 1 347/500 bonds (GM 25's, BBB-) has widened to 184bps, against an average for the year of 130bps.

Holders of GM 25's willing to go a notch lower in rating may consider switching to the F 24's to more than double the spread for a 1-year shorter bond.

The difference has only been higher at the peak of the sell-off in March/April. Since mid-August, when the F 24's were trading 300bps and GM 25's at 200bps, the F 24's have widened to 371bps while the GM 25's have tightened to 187bps.

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Marfrig tightening vs peers

Marfrig tightening vs peers

October 13, 2020
BUY

CSANBZ 7% 2027

USL20041AD89
SELL

MRFGBZ 6.875% 2025

USG5825AAB82

Related reports:

Sharp tightening in MARB BondCo PLC 6 7/8 2025 bonds (MRFGBZ 25's, BB) makes them look expensive against corporates in the region.

Katana identifies the largest dislocation against Cosan Luxembourg S.A. 7% 2027 bonds (CSANBZ 27's, BB). While both bonds were trading at 470bps at the beginning of October, MRFGBZ 25's spread are now at 248bps, while CSANBZ 27's are at 392bps.

Cosan Luxembourg S.A. 7% 2027 bonds (CSANBZ 27's, BB) currently trade 145bps over MRFGBZ 25's, against an average for the year of -60bps.

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COFIDE Curve Trade

COFIDE Curve Trade

October 9, 2020
BUY

COFIDE 5.25% 2029

US21987DAB01
SELL

COFIDE 4.75% 2025

US21987DAD66

Related reports:

We have been watching the dislocation between the 4.75% 2025 issue and the 5.25% 2029 issue on the Corporacion Financiera de Desarrollo S.A. curve.
Our interest peaked when the zspread difference between the two issues reached 162bps. The idea was bookmarked and has reverted 38bps since September 17th. The difference between the mean and the spread difference now stands at 22bps.

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Swap out of the PETBRA 6.25% 2024's for a higher credit rating in 2025

Swap out of the PETBRA 6.25% 2024's for a higher credit rating in 2025

September 30, 2020
BUY

RAILBZ 5.875% 2025

USL79090AB95
SELL

PETBRA 6.25% 2024

US71647NAM11

Related reports:

The spread between Rumo Luxembourg S.a r.l. 2025( RAILBZ 5.875%) and Petrobras Global Finance B.V. bonds (PETBRA 6.25% 2024) has spiked from the LTM average 50bps on September 22nd to 130bps currently (1.45 standard deviations).

During the first week of July both bonds traded between 380bps and 390bps. However, the PETBRA 6.25% 2024 spread tightened at a faster pace and now stands at 256bps while the RAILBZ 5.875% remain in the 380bps area. An opportunity has opened for PETBRA 6.25% holders to swap into the RAILBZ 5.875% issue picking up a higher credit rating.

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Dislocation in Latam Consumer Goods

Dislocation in Latam Consumer Goods

September 29, 2020
BUY

CAMEBO 5.75% 2027

USG20011AC94
SELL

BRFSBZ 4.75% 2024

USP1905CAE05

Related reports:

The credit spread of The Central America Bottling Corporation 5 3/4 2027 bonds (CAMEBO 27's, BB) has been on a widening trend since mid-August. Katana identifies a dislocation against BRF S.A.  4 3/4 2024 bonds (BRFSBZ 24's, BB).

The spread difference peaked at 164bps last week and is starting to revert, currently being at 136bps (2.5 standard deviations).

Link to this idea...
4 Curve Trade Ideas in EUR Investment Grade Bonds

4 Curve Trade Ideas in EUR Investment Grade Bonds

September 26, 2020
BUY

KO 0 1/2 08/03/2024, C 1 1/4 10/04/2029, NAB 2 3/4 08/08/2022, GS 2 1/8 30/09/2024

XS1574672397,XS1980064833, XS0813400305, XS1116263325
SELL

KO 1 1/8 22/09/2022, C 0 1/2 29/01/2022, NAB 0 7/8 20/01/2022, GS 2 0 27/07/2023

XS1112678559, XS1939355753, XS1167352613, XS1265805090

Related reports:

The Katana dashboard alerted users to 4 curve trades in the EUR Investment Grade market. If you want to see curve trade ideas daily, let us know.

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3 more of our ideas that are in the money (This is our 5th in the money update)

3 more of our ideas that are in the money (This is our 5th in the money update)

September 25, 2020
BUY

MILPOC 4.625% 23, BRASKM 3.5% 2023, NATURA 5.375% 2023

USP67848AA22, USN15516AA01, USP7088CTF33
SELL

RETAIL 5.375% 23, ALPEKA 4.5% 2022, BEEFBZ 6.5% 2026

USP01703AA82, USP7088CTF33, USL6401PAF01

Related reports:
Update - ECOPET 2023 PETBRA 2022 Idea Picked Up 94 basis points in 10 Days

Update - ECOPET 2023 PETBRA 2022 Idea Picked Up 94 basis points in 10 Days

September 24, 2020
BUY

ECOPET 5.875% 2023

US279158AC30
SELL

PETBRA 6.125% 2022

US71647NAR08

Related reports:

You might be asking yourself - "Self, how does Katana find these ideas?"

We want you to know that we are not manually trying to come up with these ideas. That would be like looking for a needle in a haystack.

Manually trying to find trade ideas

Each morning we are able to look at a list of "Top Ideas" that were identified by the Katana algorithm. We add a little bit of copy to an idea that looks interesting and then post for your enjoyment.

Your next question might be - "Self, that didn't really answer my question. How does Katana find the ideas?"

Ahh. Sorry.

The Katana algorithm leverages Google Cloud Platform AI models to analyze over 200 million bond pairs over multiple bond universes* for spread dislocations. Once identified, they are ranked by Zscore, Similarity and Reversion.

The results have been quite impressive so far. Our engineers found that 91% of the pairs identified as “Top Ideas” revert to their mean separations 30-days later with a median compression of -11 bps.

*
EUR Investment Grade, EUR Governments, USD Emerging Market Sovereigns, USD Emerging Market Corporates (more to come) 

Back to the update for the ECOPET 5.875% 2023 / PETBRA 6.125% 2022 trade idea:

On September 14th 2020, we posted that the sharp spread movement in the PETBRA 6.125% 2022's as an opportunity to take profit and swap into the ECOPET 5.875% 2023.

September 14th 2020

The PETBRA 6.125% 2022's have snapped back while the ECOPET 5.875% 2023's have widened slightly higher.

Zspreads

The 132 basis point spread between the two reverted back to the mean and now stands at 38.8 basis points.

Zspread Difference

The following picture is a summary that you can reference when you book your demo -


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EUR Investment Grade Idea: HSBC 1.5% 2024's are wider than C 1.625% 2028's

EUR Investment Grade Idea: HSBC 1.5% 2024's are wider than C 1.625% 2028's

September 23, 2020
BUY

HSBC 1.5% 2024

XS1917601582
SELL

C 1.625% 2028

XS1795252672

Related reports:

Katana identifies a dislocation between HSBC Holdings plc 1 1/2 2024 bonds (HSBC 24's, A+) and Citigroup Inc 1 5/8 2028 bonds (C 28's, A). HSBC 24's traded around 10bps tighter than C 28's before the sell-off in March-April.

Since then the difference has been gradually inverting and this accelerated in September.
Shorter-dated and rated 1 notch higher, HSBC 24's currently pay 94.8bps, 22.6bps more than C 28's (2.1 standard deviation from the last 12 months average of -0.7bp).

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Dislocation in LatAm utilities

Dislocation in LatAm utilities

September 22, 2020
BUY

PROMIG 3.75% 2029

USP7922TAA7Q
SELL

TRANSM 4.375% 2023

USP3083SAC90

Related reports:

The difference in the z-spread between Promigas S.A. E.S.P. 3 3/4 2029 bonds (PROMIG 29's, BBB-) and Consorcio Transmantaro S.A. 4 3/8 2023 bonds (TRANSM 23's, BBB) has increased to the highest level in the last 12 months. At 186bps, the spread between the 2 utilities is at 2.4 standard deviations from the yearly average of 96bps.

Holders of TRANSM 23's can look at the opportunity to take profits on the recent tightening from 190bps to 130bps since the beginning of September and switch to the longer dated PROMIG 29's at 315bps.

Link to this idea...
PEMEX Curve Idea (Swap out of the 5.375% 22's into the 4.875% 24's)

PEMEX Curve Idea (Swap out of the 5.375% 22's into the 4.875% 24's)

September 21, 2020
BUY

PEMEX 4.875% 2024

US716654QBH48
SELL

PEMEX 5.375% 2022

US71654QCE08

Related reports:

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.

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.

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Dislocation Detected!  2 High Yield LatAm Sovereigns on the Long End of the Curve

Dislocation Detected! 2 High Yield LatAm Sovereigns on the Long End of the Curve

September 18, 2020
BUY

ELSALV 7.125% 2050

USP01012CA29
SELL

COSTAR 7% 2044

USP3699PGH49

Related reports:

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).

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Say this 3 times as fast as you can:  BANSAF IS A BETTER BB BRAZILIAN BANK BOND

Say this 3 times as fast as you can: BANSAF IS A BETTER BB BRAZILIAN BANK BOND

September 16, 2020
BUY

BANSAF 4.125% 2023

US05964TAQ22
SELL

CAIXBR 3.5% 2022

US12803X2B68

Related reports:

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.

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This Chilean utility has a shocking spread divergence

This Chilean utility has a shocking spread divergence

September 15, 2020
BUY

AESGEN 4.875% 2029

USP3713QAA50
SELL

SQM 3.625% 2023

USP8718AAF32

Related reports:

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.

Link to this idea...
Swap PETBRA 22's for ECOPET 23's

Swap PETBRA 22's for ECOPET 23's

September 14, 2020
BUY

ECOPET 5.875% 2023

US279158AC30
SELL

PETBRA 6.125% 2022

US71647NAR08

Related reports:

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

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

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

Link to this idea...