PETROBRAS LOOMS LARGE
European high-yield bond managers are also increasingly wary about exposure to Petrobras, which is at the centre of the country’s “carwash” corruption scandal but also got caught up in S&P’s sovereign downgrade and was cut two notches from BBB- to BB.
The Brazilian oil giant has 6.9bn of euro bonds outstanding, alongside £1.75bn of sterling, and its downgrade last week will push them into some high-yield bond indices.
Bank of America Merrill Lynch chose to keep emerging market corporates in its euro high-yield index in July, but also created new high-yield indices comprising only developed-market names.
“A lot of managers will consider changing their benchmarks, as their clients do not want exposure to emerging market bonds through their European high-yield portfolios,” said Peter Aspbury, a portfolio manager at JP Morgan Asset Management.
But even those who switched to the new benchmarks may not be completely free of Petrobras exposure.
Brazil Energy Insight 
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